Economics: China’s re-opening & global inflation
Will China stimulate demand? Will private-sector confidence rebound?
Fiscal and monetary support is likely to be limited, so the government will lean more on regulatory easing to boost growth. We think confidence will rebound as economic activity normalises. But there may be longer-term scarring from the zero-Covid policy.
Will consumption boom? Will the housing market stabilise?
Consumption is likely to accelerate as the savings rate normalises, but “excess” deposits probably won’t be spent. Instead, some savings may be shifted into property. But if housing demand remains weak, policymakers may not be able to stave off a crisis.
Will inflation pick up? Will it spread to other countries?
Domestic goods price inflation will likely remain muted, but service prices and wages could rise due to supply-side damage. The international spill overs are likely to be limited to commodity prices. China’s re-opening isn’t likely to derail global disinflation.