The re-opening of China’s mainland market has been met with a subdued response, with the CSI 300 rising less than 0.5% and the Shanghai Composite eking out less than 0.2%.[0] The 0.5% gain in the yuan was largely in line with the performance of the offshore yuan, while Hong Kong’s Hang Seng tumbled 2.75%, giving back most of last week’s gains.[0]
The re-opening of China brings with it a variety of implications, particularly around the subject of inflation.[1] Economists and analysts believe that the re-opening of the world’s second-largest economy could boost global growth, while business leaders and policymakers are cautious of the effects on inflation.[2] The International Energy Agency has forecasted global oil demand to rise to an all-time high of 101.7 million barrels a day this year, with China accounting for almost half of that increase.[3]
In light of this, Goldman Sachs and Morgan Stanley have raised China’s GDP growth forecast for 2023 to more than 5%, with Goldman Sachs analysts raising their forecast for earnings growth of Chinese equities to 17% and boosting the outlook for Chinese listings in Hong Kong to 34%.[4] Markets in Malaysia, Thailand and Singapore are expected to benefit as stocks with greater exposure to China’s economy get a shot in the arm.[5]
The Federal Reserve, European Central Bank, and the Bank of England are expected to hike their interest rates in response to the growing global inflation, as they aim to address one of the top economic challenges of advanced economies.[6] As China continues to reopen, it is likely to have far-reaching impacts on global markets and economies.[0]
0. “China’s Reopening Proves Anti-Climactic” Investing.com, 30 Jan. 2023, https://www.investing.com/analysis/chinas-reopening-proves-anticlimactic-200634827
1. “China’s Reopening Complicates Global Fight Against Inflation” The Wall Street Journal, 22 Jan. 2023, https://www.wsj.com/articles/chinas-reopening-complicates-global-fight-against-inflation-11674344924
2. “[ANALYSIS] China’s reopening to help ease inventory woes” 코리아타임스, 25 Jan. 2023, https://www.koreatimes.co.kr/www/biz/2023/01/175_344015.html
3. “China’s reopening isn’t all good news. Inflation could get a second wind” kuna noticias y kuna radio, 27 Jan. 2023, https://kesq.com/news/2023/01/27/chinas-reopening-isnt-all-good-news-inflation-could-get-a-second-wind
4. “Xinhua Headlines: Despite COVID-19 pandemic, China remains important engine for global growth” Xinhua, 30 Jan. 2023, https://english.news.cn/20230131/5720f0eb887d4b5582e2cb9db24054dd/c.html
5. “What China’s reopening means for markets” Financial Times, 30 Jan. 2023, https://www.ft.com/content/89e8e569-7f5f-40a4-bf2a-4fd651663895
6. “Anti-Climactic Return of China” Forex Factory, 30 Jan. 2023, https://www.forexfactory.com/news/1202845-anti-climactic-return-of-china