DAVOS, Switzerland- China’s declaration that it is open for business was welcomed by attendees at the World Economic (WEF) as a likely boost to global growth, though many also expressed caution over how it could drive up global COVID-19 cases and inflation.
The topic of China’s reopening came up at several discussions, both public and private, as China’s economic tsar Liu He made a big pitch for foreign investment in the ski resort of Davos on the first visit abroad by a high-level Chinese delegation since Beijing shelved its three-year-old zero-COVID policy.
While Liu said that people in China were recovering faster than he had expected from COVID-19 after the dismantling of curbs unleashed a giant wave of infections, many executives with businesses in China said they were still forecasting a bumpy few months before things start to get better.
Joe Kaeser, chairman of Siemens Energy, said during an interview with the Reuters Global Markets Forum that the upcoming Lunar New Year week-long holiday, when millions of people are expected to travel home to see family, would be a “super spreader” event.
“The bad news is that there will be a lot of pain and likely fatalities,” he said. “The good news is that once that is over, come summer or fall, China will be moving to the second phase of reform and opening up…That could certainly help the world also grow and ease the pain of a lot of industrial countries, including Europe.”
Among those who warned on the reopening impact’s on inflationary pressures were the International Monetary Fund Deputy Managing Director Gita Gopinath and European Central Bank President Christine Lagarde, as well as Larry Fink, the chief executive of the world’s largest asset manager BlackRock.
“It is estimated that the Chinese economy can grow 5 percent or 6 percent in the third and fourth quarter. If that’s the case, are they going to demand an extra 500,000 or million barrels of oil?” Fink said at an event on the forum’s sidelines.
“At the same time, we’re estimating a mild recession in Europe and the United States that offset it. If not, the trends would say we’re going to have elevated energy prices.” – Reuters
