: Optimism is returning to China’s economy. Can it last?

by | Jan 11, 2023 | Stock Market

Investor sentiment in China is on a major upswing, with markets experiencing a double-digit bull run since officials announced the end of harsh COVID-containment measures in November. But observers are already asking: How sustainable is the rebound? A number of positive moves have put wind into the sails of mainland Chinese and Hong Kong stock indexes, which have been awaiting good news after one of their worst years on record.

First, Beijing scrapped domestic anti-virus measures, finally allowing free movement to frustrated consumers, who investors hope are ready to release pent-up demand. And on Sunday, quarantine requirements for international arrivals were dropped. Prospective travelers are now awaiting a normalization of China-bound flight prices, which remain well above pre-pandemic levels. Officials on Wednesday said publicly they were confident such a trend was imminent, adding that flights coming into and out of China should reach 25% of their 2019 levels by March. Following Beijing’s abrupt scrapping of its draconian zero-COVID measures, policy makers over the weekend said they were also ending their years-long tech-industry crackdown, sending shares of Alibaba Group Holding

and Tencent Holdings
toward a net gain of $100 billion in market value so far this year. Further, authorities are planning to ease borrowing restrictions for property developers, Chinese media have reported, seen as a lifeline for the long-beleaguered sector. “The theme of a reopening of China is not just about the increasing convenience of cross-boundary trade, investment and traveling,” said Bruce Pang, head of research and chief economist for Greater China at Jones Lang LaSalle. “It also includes China’s pragmatic policy stance toward a more growth-focused strategy, pro-business policies that could shore up confidence and sentiment, and steadfast commitment on reform and opening up,” he told MarketWatch. Alongside rising market sentiment have been upward revisions of China’s expected 2023 GDP growth. Morgan Stanley on Monday lifted its forecast to 5.7% from just above 5%. Yet unknowns remain — chief among them how swiftly China’s current COVID “tsunami” will sweep …

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