Beijing’s abandonment of its zero-Covid policy has reassured markets and calmed protesters, but it may not do much for the economy. Persuading households that hoarded $1.9 trillion this year to spend will be difficult, says ywchen1
Cities desperately want budgetary relief from expensive testing and quarantine enforcement mandates, and revive business investment and consumption. Retail sales hit a five-month low in October, falling back into contraction; property – which accounts for a quarter of economic activity – has seen sales plunge 26% in the first 10 months. The question is how much of a boost combined efforts to relax zero-Covid and prop up the real estate sector will have.
In the most optimistic scenario, the reopening is swift and the medical system manages to digest the inevitable explosion of new cases without a spike in deaths. Citizens would surge into restaurants and theaters, buy train tickets to visit family and friends, and jet off to vacation abroad, relieving tourism-dependent economies like Thailand. They would also step back into the housing market.
This is unlikely. Thanks to lockdowns and financial volatility, citizens added over 13 trillion yuan to their savings in 2022 in an economy with one of the world’sWere urban households to draw down half of the excess savings accumulated since 2020, Standard Chartered analysts estimate it would add one percentage point to growth in 2023. A property revival would be even more statistically beneficial.
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