Standard Chartered Bank (SCB) in downtown, brand logo and office building in Shanghai.
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China’s economy will be “on fire” in the second half of 2023 as economic performance of East and West diverges, according to Standard chartered President José Vinals.
The reopening of China’s economy after several years of strict “zero Covid” measures has fueled sentiment among economists that the global growth and inflation picture this year could be less bleak than initially feared.
OECD Secretary-General Mathias Cormann said earlier this week that the reopening was “overwhelmingly positive” in the global battle to tackle skyrocketing inflation.
China’s GDP grew by just 3% in 2022, official figures revealed earlier this week. However, short-term data pointed to a faster-than-expected recovery as pandemic-era measures are being phased out.
The reopening has proved tricky as China has reported a huge surge in Covid cases and deaths in recent weeks.
While acknowledging the human cost of the increased death toll, Viñals suggested that the ensuing widespread immunity that some analysts have suggested, coupled with the reopening of borders, will allow the economy to “surprise upside” in 2023.
“I think the Chinese economy will be on fire in the second half of the year and that will be very, very important for the rest of the world,” he told CNBC at the World Economic Forum in Davos. Switzerland.
“This is not only because of the Covid reopening, but also because of the support that the government is giving with their fiscal policies, support for the real estate sector, which is extremely important, and also because of the intensity of regulation or regulatory action against some sectors like the IT sector, so I think all those things will be very important positives.”
Emerging Markets Revival
In addition to a contrast between global economic performance in the first and second half of the year, Viñals also suggested there will be a difference between the Eastern and Western hemispheres, with Asia and the Middle East driving global growth in 2023.
Despite the Federal Reserve’s aggressive monetary policy, tightening and strong U.S. dollar in 2022, emerging market economies for the most part proved surprisingly resilient.
Viñals said the structural improvements that helped isolate many emerging economies would also allow them to prosper in years to come.
“Not all emerging markets are created equal and they have very different exposures to the higher dollar and higher interest rates in the United States, and the ones that are more negatively impacted are those with high foreign currency debt,” he said.
“There are a number of low-income and lower-middle-income countries that have certainly run into trouble, but the vast majority of emerging markets are doing well.”
In particular, he pointed to India and some of the Southeast Asian countries that suffered a ripple effect during the 2013 “taper tantrum” in which a sharp market sell-off prompted the Fed to slow down the pace of government bond sales. to slow down.
“I think the improvement in emerging market fundamentals, the improvement in foreign exchange reserve accumulation, better economic policies, better governance, all of that helps build or maintain confidence and I think that’s a big plus for them.” Vinals said.