😮 China's Reopening: Boon or Bane?
China is finally getting a little less strict about Covid and reopening its economy. Wondering what that means for India? ReadOn!
China has been stuck in time for the last 3 years.
While we have erased Covid from our memories (because we had newer demons like inflation to deal with), China is still fighting this demon.
But it could be seeing light at the end of this long Covid tunnel soon.
The country is finally putting an end to all its strict Covid policies and reopening for good.
But what does that mean for us? ReadOn!
🎭 China's Bittersweet Reopening
The news that China is reopening and is back in business has had mixed responses.
While some are celebrating the news…
Others are growing cautious.
Why such different views on China's reopening?
👍 What's Good About China Reopening?
Well, China is the world's second-largest economy and the world's largest exporter.
Its top trading partners are the US, Hong Kong, Japan, South Korea and India.
So, when China shut itself away from the world, these countries faced shortages of products they usually import from China.
In fact, semiconductor shortages, which impacted electronics devices across the world, led India to launch its very own semiconductor plant!
So, China's reopening could boost supplies in a lot of markets. This could also bring down inflation as less money will now be chasing more goods.
China also imported a lot of commodities like oil (2nd largest importer) and metals to fuel its factories.
Due to lockdowns, these imports had slowed down, so the countries that sold to China were also facing cash crunches.
With China back on the scene, demand will rise once again and the whole world could avoid a potential recession or worse stagflation.
Yes, China, which started this whole mess in the first place, could be the world's saviour.
But that's about the good.
Let's flip the coin and look at the pessimism here.
👎 The Pessimism Around China's Reopening
You see, when other countries reopened, their economies were hit with revenge shopping.
But in China, prolonged shut downs with no government aid has left most people in a lurch.
Many stores have shut down, small businesses have moved out of the country and foreign investors and companies like Apple have distanced themselves from China.
Apple was one of the first companies that started looking for alternative manufacturers amid China's Covid lockdowns.
Other major manufacturers like Semiconductor Manufacturing International Corp, Taiwan Semiconductor Manufacturing Co., Volkswagen and even China's homegrown Nio halted productions amid the lockdowns.
What's more, China's crackdown on tech giants and the property market has also alienated investors.
For instance, SoftBank pulled out a large amount of cash from Alibaba and Tencent also saw $7 billion worth of investments being pulled out.
Thanks to all of this, youth unemployment in China is currently 19.9%!
Now, interestingly enough, despite this gloom and doom, air ticket bookings to China have tripled on December 3 and 4 from a week ago!
So, at least travel demand is high, no? There is still a chance China's demand will grow and save us from a recession, right?
Uh-huh. Sorry to break it to you dear optimist, but this high travel demand may only cause more issues. Huh?
You see, less than 1% of China's population has been infected by Covid. Plus, due to the large population, vaccination rates aren't very high either.
So, reopening could mean a full-blown outbreak of Covid again. In fact, cases are already on the rise and 60% of the population could be impacted!
This could further push the country away from achieving its goal of 5.5% growth this year (World Bank projection for China's growth is 2.8%)
So, maybe China won't be our saviour. But what could be the potential harm if the country reopens?
👀 What This Means For India
China is going to be a hotbed of infections soon, according to experts. And we've all seen how the whole world catches a cold when China sneezes.
However, some large investors and investment banks are still betting on China's rapid growth after lockdowns reopen. So, they want to invest in China.
Now, if their optimism and infusion fuels growth, then India loses. And if it doesn't work out, then also India loses. How?
Chinese lockdowns had made India one of the favourite manufacturing hubs for companies worldwide. If China bounces back quickly, a lot of companies could go back to China, leaving us behind like their side squeeze.
*Plays Channa Mereya sad version pro max*
And well, if it doesn't work out, investors will lose their money. Yes, the money that they could have invested in our markets. So, we still lose.
But on the other hand, if a recession is prevented eventually more funds could come into India, boosting our economy in the long run.
Now, this has been enough speculation for one day. We'll have to wait and watch what happens in China.
In the meantime, let's hope that Covid and lockdowns never return!
⚡In a line: The world has been waiting for China to reopen but the results of reopening could be much different than what most people hoped for.
💡Quick question: Do you think China still poses a threat to India or has Covid ruined its economy?
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See you tomorrow :)
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China is opening India's borders too, a bit too much viz a viz LAC