"The Chinese market is simply too attractive and too central in the global economy and global supply chains for investors to back away from it entirely," said Mattie Bekink, the China Director at the Economist Intelligence Corporate Network of The Economist Group.
She said this sort of final signal — despite the kind of uncertainty and the bumpiness that the country is experiencing at present with pressures on the healthcare system and surging infections — would at some point even out. "I do expect that we'll see kind of a renewed interest or kind of a resumption of interest in the China market," she siad.
From an Indian perspective, China reopening after three years is a big theme. The rolling lockdowns the country was facing resulted in an advantage for major economies like India. CNBC-TV18 spoke to Bekink and Xinxin Li, the MD of the Observatory Group, to find out if China’s reopening presents competition from the economic growth and flows perspectives as well as the market point of view.
Impact of China's zero-COVID
Bekink said China's zero-COVID policy really had a chokehold on the country’s economy. "It worked very effectively for the first two years, but since the Omicron transition the need for increasingly restrictive controls and lockdowns has stomped on consumer and investor confidence. And that's why this reopening is so important in terms of economic news and in recovery as we head into the new year …or we are in the new year," she said.
Li said according to estimates, the zero-COVID policy lost China at least 2 percent GDP per year in the last three years.
He sees a dramatic shift among policy makers in China. "China is the first country where the COVID-19 outbreak was reported and is now the last country getting out, but the way China is accelerating from the pandemic is quite dramatic and over the past few weeks there has been a dramatic shift by Chinese policymakers on several fronts, not only zero-COVID policy but also the regulation," he said.
Bekink too said China's sudden shift on COVID-19 is more of a 'v' turn than 'u' turn because it was so sudden.
2023 outlook for China
The World Bank's forecast indicates a sharp, long-lasting slowdown. It has forecast growth declining to 1.7 percent in 2023 from 3 percent from just six months ago.
Meanwhile, Morgan Stanley has raised China's 2023 GDP growth to 5.7 percent compared to the 4.8 percent consensus. It said it expects the GDP growth and consumption to move to a new trend of growth by the second half of this year. It also raised the price targets and expects China to top global equity performance this year.
Bekink said this year would be one of change and challenge for China. "We are also seeing a third Xi Jinping administration and the big question will be whether this new administration will undertake the economic reforms and structural reforms necessary to ensure China's long-term competitiveness or some of the lingering and pressing short-term issues like the property sector and the transition out of zero-COVID," she said.
She also expects to see further policy shifts in China. She said one can already see that the Xi Jinping’s third term is focused on shaping the economy. "The society that China wants for the future — it's very clear that growth and development is a top priority but balanced with concerns about national security and social fairness. So, I do expect that we will see further policy shifts that are aligned with that longer term vision for China," she said.
Meanwhile, Li said there is a chance that China can achieve the gross target the government has set up. However, there are a lot of uncertainties down the road, she cautioned.
