Posted By: MJ Economics
The decision By President Xi Jinping and the Chinese Communist Party to abandon its Zero-Covid policy in response to mass public protests in November has led to a substantial rise in the number of people contracting and dying from the disease in recent weeks. This is putting the country’s healthcare facilities under enormous strain as the numbers of those seriously ill multiply. Official figures claim 60,000, mostly elderly Chinese citizens have died from Covid between early December through to mid-January. The situation is likely to have been worse in reality, and the effects of the health crisis will continue for some time.
Balancing this, China’s economic recovery prospects have improved, with Covid cases hitting peak levels in many cities, and consumers and producers now able to freely engage in economic activity without restrictions. Providing an additional economic lift, real estate (property) market and border controls have also eased and authorities are not minded to tighten monetary policy given that annual inflation is still low, at 1.8% in December according to the consumer price index published by the National Bureau of Statistics.
Although managing Covid cases and the large-scale inoculation programme will remain challenging, especially when taking into account the reduced efficacy of domestically manufactured vaccines, the growing prospect of a stronger Chinese economy is likely to have unanticipated implications for investors and traders in 2023. Our newly revised and more optimistic forecasts for real GDP growth and other indicators of demand and output reflect this, but we would also caution against exuberance. China still has numerous economic imbalances and a stronger economy will also have an impact on global energy supplies, commodity prices and inflation. There are also foreign policy concerns to weigh up, notably China’s regional relations and not least the delicate situation regarding Taiwan…
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