The earlier-than-expected reopening of China’s economy after a swift end to its zero-COVID policy has been hailed by global strategists and investors as one of the highlights of 2023. China’s growth must continue.
With domestic consumption accounting for about 15 percent of global GDP, China is struggling to reverse the slowing trajectory of global growth and bolster its interests.
Overall, China’s sharp move to Covid zero should have the biggest effect on domestic demand after the initial effects wear off. There have been fears about the impact on supply chains, as some disruptions are expected in the first phase of the reopening.
However, since the Chinese authorities have restored supply chains relatively quickly in the face of crises, it can be said that they will soon return to a relatively normal stable state. Indicators such as PMI supplier delivery times or freight costs are normalizing relatively quickly.
China’s economic growth should be in the range of 4 to 6 percent in 2023. But to reach 5 percent or more, consumption needs to be the main driver and rise by 9 percent. Overall, domestic demand is expected to grow 2 to 6 percent in 2022 or this year.
A statistical analysis of January and February shows that the recovery is promising, with steady production, retail sales and home sales normalizing. But there is still uncertainty about whether the sustained bullish recovery will be sustained.
Demand for other imports, particularly from Asia, may also increase
The reopening of China will also have a positive impact on Asian tourism, with Thailand as the main beneficiary. However, outbound travel and tourism could be delayed for three to six months after reopening due to the resumption of flights and passport restrictions for travelers.
The reopening will put some pressure on global growth and inflation. Therefore, China’s economic reopening is unlikely to change the direction of the global economy on its own.
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