Experts: Fast rebound to help world
China’s economy is widely expected to rebound by the end of the first quarter as COVID-related disruptions wane, giving a much-needed boost to the ailing global economy, according to international investment banks and asset managers.
A rebound in the world’s secondlargest economy will help drive the growth of neighboring economies, strengthen global supply chain stability and provide attractive opportunities for international investors, they said.
“The speed of China passing the peak of COVID-19 — at least when it comes to the recent wave of infections — is much faster than we previously expected. This means a significant economic upturn may soon take place,” said Chen Dong, head of Asia macroeconomic research at Pictet Wealth Management.
China’s economic activity may pick up substantially by the end of the first quarter, which will reduce uncertainties related to global supply chains, boost outbound travel and benefit neighboring economies, Chen said.
While attending a Jan 10 meeting organized by the International Department of the Communist Party of China Central Committee for a briefing on the optimization of the country’s pandemic control policies, international executives also said the changes are timely, necessary and based on science.
“The development of the policy in China over the past month or so has been very positive, and we see China is ready to take its leading position in the world again,” said Jacques De Vos, executive director of CED Prometheus, a business consultancy.
The situation in China is becoming normal and is positive for business exchanges, he said, adding that the country has well coordinated economic development and protection of people’s health.
Pierre Mirochnikoff, vice-president of the French Chamber of Commerce in China, said that China’s COVID response is a science-based approach that prioritizes people’s lives and health.
As the global economy faces headwinds, small and medium-sized enterprises will gain more opportunities from China’s high-level opening-up, he said. “Now is the time to focus on cooperation to do business in China.”
As some provinces and cities in China have announced that they have passed the peak of the current COVID-19 outbreak, population mobility and economic activity are regaining their momentum, propelling a rally in the Chinese currency and the stock market.
The central parity rate of the renminbi on Jan 10 jumped 654 basis points to 6.7611 against the US dollar, reaching its strongest level since mid-August.
Amid weakening global economic and market prospects and tightening campaigns by a number of nations’ central banks to curb inflation, the pickup in China’s economic fundamentals and its financial markets offers unique opportunities to international institutional investors.
Xu Fei, head of alternatives and multi-asset strategies at Vanguard’s Quantitative Equity Group, said that the United States-based asset manager is increasing its exposure to emerging market assets to capitalize on the upside potential offered by Chinese A shares.
China’s unfolding economic rebound sharply contrasts with the rising recession risks in major developed economies, providing international investors with valuable diversification benefits, Xu said.
Analysts at Morgan Stanley also said in a report on Jan 9 that China may top global equity market performance in 2023.
Given that China’s economic activity is recovering from the impact of COVID-19 at a faster pace, they increased the forecast for the nation’s GDP growth this year from 5.4 percent to 5.7 percent while also expecting the renminbi to rise to 6.65 against the dollar in the next 12 months.
Stepped-up fiscal and monetary policies will also stabilize China’s economic recovery, said Wang Tao, head of Asia economics at UBS Investment Bank, who pointed to the possibility of a further reduction in the reserve requirement ratio — the proportion of money that lenders must hold as reserves — as well as further measures to boost the real estate market by authorities in a number of cities.
Efforts should be made to properly boost credit expansion early this year to deliver “accurate and substantial “support for key areas and weak links, the People’s Bank of China, the country’s central bank, said on Jan 10 after holding a meeting with the China Banking and Insurance Regulatory Commission.
Wang said that China’s economic recovery is expected to help boost the travel revenue of some neighboring economies and benefit producers of oil and other commodities by propping up related market demand.