Breaking News
Investing Pro 0
New Year’s SALE: Up to 40% OFF InvestingPro+ CLAIM OFFER

China’s reawakening from Covid slumber unlikely to save slowing global economy

Economy Jan 25, 2023 07:08PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters
 
USD/CNY
0.00%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
HSBC
-0.88%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Yasin Ebrahim

Investing.com – A stronger economy in China is often a key ingredient for global growth. But as China prepares to flex its economic muscles following several years of slumber under Covid duress, some are warning that this time is different.

As China reopens for business, the “positive spillover to the rest of the world will not be on par with history, as global aggregate demand is slowing down as a result of widespread monetary tightening," Morgan Stanley said in a note on Wednesday, estimating global economic growth to slow to 2.6% this year from an expected 3.0% in 2022.

It isn’t puzzling to see why China, the world’s second largest economy, has a heavy hand in the global economy. Accounting for a nearly fifth of global growth last year, China boasts a stake that is well ahead of its closest rivals. The U.S. made up about 13.5% of global growth last year, India 9.3%, and Japan just 3.4%, according to data from the World Economics Research, London.

History shows that when China enjoys an acceleration in economic growth, imports from the rest of the world and global trade gather pace, underpinning the global economy.

But this time is different. And it has COVID’s fingerprints all over it.

Several years of harsh Covid lockdowns and restrictions under Beijing’s “zero COVID” policy, forced many Chinese to stay home and sock away rather than spend their extra income, ushering in record savings growth.

Renminbi deposits held by Chinese households grew in 2022 by a record Rmb17.8tn ($2.6 trillion), up markedly from Rmb9.9tn in 2021, according to Data from the People’s Bank of China.

Armed with a wave of cash, Chinese consumers are expected loosen their purse strings and spend lavishly on services that were shuttered during the pandemic era. The coming services-led rather than goods-led acceleration in growth will likely skew growth in China inward rather than outward. This isn’t good news for those pinning their hopes on a China-infused boost to global growth.

"Our China team now sees an earlier and stronger growth recovery lifting 2023 GDP growth to 5.7%, {Morgan Stanley said, though added that as "services are less tradable than goods, we should expect a lower beta on global trade.” 

Others, however, have been more constructive somewhat on the reopening boost to the global economy. “As the second-largest economy in the world, accelerating Chinese household and investment spending will help put a floor under global trade at a time when demand in the West is faltering," said Frederic Neumann, chief Asia economist at HSBC Holdings (NYSE:HSBC), according to Bloomberg.

Still, the tightening of monetary policy by global central banks -- that is weighing on the world economy -- will also curb the positive boost, albeit limited, from a recovery in China.  

Pointing to “one of the most aggressive monetary policy tightening cycles in recent history,” the World Bank recently warned that “global growth has slowed to the extent that the global economy is perilously close to falling into recession.”

China’s reawakening from Covid slumber unlikely to save slowing global economy
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (6)
Justin Lonsdale
Justin Lonsdale Jan 25, 2023 11:54PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hope my SE calls rip soon
Dave Jones
Dave Jones Jan 25, 2023 10:13PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
That just seems weird. I'm not sure about any of that.
William Smith
William Smith Jan 25, 2023 9:18PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Reopening will cause big spike in oil prices reigniting high inflation, hurting all tje world's economies and causing the stock market to drop as the Fed raises rates even higher.
ZS Beck
ZS Beck Jan 25, 2023 9:18PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
WrongChina and India buying more Russian oil than they want.
John Laurens
John Laurens Jan 25, 2023 8:23PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Decouple from China and Russia. The world is turning to India and Vietnam, etc. for manufacturing. China is so last decade...
B L
B L Jan 25, 2023 8:23PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Though America was all about bombing Vietnam and belittling poor India?
John Laurens
John Laurens Jan 25, 2023 8:23PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
B L  America has never remained enemies with any nation or kept one inch of land taken during a war. India gives as good as they get.. Allies don't always get along perfectly. Notice how China doesn't want to tick India off? That's for good reason.
Warm Camp
Warm Camp Jan 25, 2023 7:57PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Who cares about “global economy”? Invest in equities benefiting from China growth.
Sylvia Doloff
Sylvia Doloff Jan 25, 2023 7:16PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
what a stupid article
Alexis Contreras
Alexis Contreras Jan 25, 2023 7:16PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Very contributory Sylvia.
renato mello
renato mello Jan 25, 2023 7:16PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
why so?
Sylvia Doloff
Sylvia Doloff Jan 25, 2023 7:16PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
a blanked statement to say China reopening will do nothing for the global economy is stupid that's why so
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email