Standard Chartered Bank (SCB) downtown, brand logo and office building in Shanghai.
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China’s economy will be ‘on fire’ in second half of 2023 as East and West economic performance diverges, says Standard charter President Jose Vinals.
The reopening of the Chinese economy after several years of strict “zero-Covid” measures has reinforced the feeling among economists that the picture for global growth and inflation could be less gloomy than initially feared this year.
Mathias Cormann, Secretary General of the OECD earlier this week said the reopening was “hugely positive” in the global fight to tackle soaring inflation.
China’s GDP grew just 3% in 2022, official figures showed earlier this week, its second-slowest growth rate since 1976 and well below the government’s target of around 5.5 %. However, shorter-term data has indicated a faster-than-expected recovery as pandemic-era measures are reduced.
The reopening proved tricky, with China reports huge increase in Covid cases and deaths these last weeks.
While acknowledging the human cost of the rising death toll, Viñals suggested that the generalized immunity some analysts have suggested that the emergence, in conjunction with the reopening of borders, will allow the economy to “surprise on the upside” in 2023.
“In the second half, I think the Chinese economy is going to be on fire and that’s going to be very, very important for the rest of the world,” he told CNBC at the World Economic Forum in Davos, Switzerland.
“It’s not only coming from the reopening of Covid but also from the support that the government is giving to its fiscal policy, from the support for the real estate sector which is extremely important, and also from the reduction in the intensity of regulation or repression regulation of some of the sectors like the IT sector, so I think all of those things are going to be very big positives.”
Emerging markets resurgence
Besides a contrast between global economic performance in the first and second half of the year, Viñals also suggested that there will be a divergence between the eastern and western hemispheres, with Asia and the Middle East driving the global growth in 2023.
Despite the Federal Reservethe aggressive tightening of monetary policy and a strong American dollars in 2022, emerging market economies have largely shown surprising resilience.
Viñals said the structural improvements that have helped isolate many emerging economies will also allow them to thrive in years to come.
“Not all emerging markets are created equal and they have very different exposures to a rising dollar and higher interest rates in the United States, and those most negatively affected are those with high leverage. in foreign currency,” he said.
“There are a number of low-income and lower-middle-income countries that have certainly struggled, but for the vast majority of emerging markets, things are going well.”
He pointed in particular to India and some of the Southeast Asian countries which suffered a ripple effect during the “tantrum” in 2013, in which a sharp sell-off in the markets prompted the Fed to slow the pace of Treasury bond sales.
“I think improving emerging market fundamentals, improving foreign exchange reserve accumulation, better economic policies, better governance, all of that helps to attract or maintain confidence and I think that’s is a big plus for them,” Viñals said.