China ended strict lockdowns, and global markets welcomed it. Analysts hope that the reactivation of the world’s second largest economy will help avoid recession in different regions. The International Monetary Fund raised its growth projections for the Asian giant, but for the West, economic activation will increase consumption and bring unprecedented inflationary pressures.
China reopened its doors and economic forecasts turned positive. The International Monetary Fund (IMF) changed in January the forecast it had made in October for China. The projection for economic growth in 2023 went from 4.4% to 5.2%.
The 2022 economic shutdown of the world’s second-largest economy was anything but positive. The Gross Domestic Product (GDP) stood at 3%, well below the 8.1% reached in 2021 and far from the 5.5% expected.
Another of the reports that reported the improvement in the Chinese economy was the monthly Purchasing Managers’ Index, issued by the Chinese statistics agency.
According to the index, the country’s manufacturing activity rose to 50.1 points on a 100-point scale. This measure considers that there is growth in activity when it exceeds 50 points, but, in addition, the new score represents a gain of 3.1 points, from the 47 reported in December.
With the new estimates, many began to talk about the return of the Asian giant to the world economic scene, a welcome relief for the global market that was predicted a recession, high levels of inflation and an increase in interest rates for this year. .
“The role of China is very important because last year, due to the ‘Zero covid’ conditions, we practically found one of the most important players in the economy and trade for the world very discreet (…) And that is reflected in China’s economic growth data, since a GDP of 3% is one of the lowest in at least the last 20 years,” the director of the China Policy Observatory told France 24.
End of the ‘Zero covid’ policy
On January 8, China reopened its borders after ending its strict ‘Zero Covid’ policy at the end of December. The reopening came despite the fact that the WHO and different epidemiologists accused the Asian giant of having underreported the number of infections that they were publicly reporting.
Since the beginning of November, the Chinese government began to relax anti-covid measures, but they were all very slight. At the time, it cut the quarantine for travelers arriving in the country and resumed issuing passports for tourism purposes. Internally, the population was tired of the closures and there was an outbreak of protests calling for a return to normality.
For the European Union and some political leaders in the United States, the reopening did not necessarily mean something positive, since in their financial projects they hope to distance themselves more and more from Asian supply and bet more on the domestic production of their countries.
At the World Economic Forum, in Davos, Switzerland, the president of the European Commission, Ursula Von der Leyen, threatened to investigate Chinese subsidies and called for Western unity to counter external “monopoly”.
For the president of the European Central Bank, Christine Lagarde, the reopening of China will only bring inflationary pressures to the rest of the world, a statement she made at the close of the Davos Forum, in another signal to Beijing.
“Something that will be positive mainly for China, something that will be positive for the rest of the world, but we will have inflationary pressure on many of us, simply because the level of energy that China consumed last year was certainly less than what they will consume this year, the amount of LNG they will buy from the rest of the world will be higher than we have seen and there is not that much capacity available in terms of oil and gas,” Lagarde said.
With Reuters and AP