How will china’s opening up impact the global economy?
This question was fascinating as my classmates discussed this in China Global Economy MBA class- especially for me, who did travel to Shanghai in Nov’22, going through 10 days of hotel quarantine and daily PCR tests; this new china opening up brought a lot of hope and happiness not only for myself but for my friends who live in china. All they wanted was freedom & they finally got it.
I can think from an emotional point of view…. But let’s get a bit economical here and talk about areas that will be impacted by china opening up:
Hong Kong: Biggest benefit will be Hong Kong; it will drive tourism, massive bank deposits, and increase demand for property and housing rents.
Tourism: With huge Chinese consumer savings and pent-up consumer demand for travel goods, exporters and popular Chinese tourist destinations, particularly across south-east and east Asia, will benefit. A surge in bookings on travel websites points to a potential recovery in global spending by Chinese tourists, which in 2019 amounted to $255bn. EU tourism will also see an 8 to 10% boost.
Commodity Prices: Chinese demand for other goods starts picking up, creating more extensive pressure on commodity prices and driving inflation further.
Foreign Investment: Some manufacturing has moved out of china due to the zero covid policy; I guess china can now regain global trust and win more deals again. This is seen as one of the most important economic events in 2023, and the business community is noticeably excited about making new deals with the world’s second-largest economy. China has been operating slowly for a while now and is not likely to pick up where it left off overnight.
Global Inflation: China accounts for about a sixth of global oil consumption; the forecast says it might push the price to $100 a barrel in 2023. As Chinese LNG demand returns, prices will rise, and competition for gas will intensify, which could leave Europe with shortages next winter.
The Belt and Road Initiative: Beijing’s colossal infrastructure and investment program has become a defining part of its foreign policy. In the BRI’s early years, dozens of emerging economies in Africa, Asia, and Latin America embraced the program, driven mainly by Beijing’s no-questions-asked approach to lending for megaprojects such as container ports, railway networks, and large-scale dams and its seemingly limitless financial firepower. The first TIR movements occurred as China lifted its Covid-19 measures and gradually resumed normal operations for international goods movements. We will see significant updates in the coming years.
Global Supply Chain: China is an integral part of the worldwide manufacturing and supply chain, and now all bottlenecks will disappear. Supply will be fixed and inflation will be under control. China is becoming wealthier, greener, smarter and digital. Since China supplies 15% of the world’s goods exports, global supply chain pressures will likely ease further.
The Chinese economy will be on fire, which will be very important for the rest of the world. I am convinced that China’s reopening will help the global economy.
