Davos 2023: China reopening? Good for growth, but tread with caution

By Brenda Goh and Lananh Nguyen

DAVOS, Switzerland, Jan 20 (Reuters) – 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% or 6%
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.”

Ngozi Okonjo-Iweala, director-general of the World Trade
Organization, pointed out that the reopening could help supply
chains work better and also boost consumer demand. “But on the
other hand we also have to see what the opening up impact is on
the pandemic,” she told a news briefing.

CHINA-US TENSIONS

Adjacent to the discussions on China’s reopening was what it
could mean for its existing tensions with the United States over
issues such as technology, trade and Taiwan, which several WEF
delegates expressed concern over.

At one panel, Bank of Japan Governor Haruhiko Kuroda posed a
question from the audience to Singapore Senior Minister Tharman
Shanmugaratnam on his view on the medium-term future on the
economic relationship between the United States and China,
commenting that one of his main worries was global
fragmentation.

“The current trajectory of that relationship, particularly
with regards to the types of restrictions on economic
interdependence, and the scale of those restrictions, we’re
going to end up with not just a zero-sum situation, but a
negative-sum situation,” Shanmugaratnam responded.

“I think both the U.S. and China will be hurt, which doesn’t
just mean the national entities but workforces, people will be
hurt.”

Mark Rutte, Prime Minister of the Netherlands which has been
drawn into a tussle over semiconductors and related supply
chains between Beijing and Washington, appealed to his fellow
European Union members to do more on coordinating the bloc’s
policy towards China.

“It’s not that we have to choose between U.S. and China, we
need to have our own policy and our policy should be first of
all that we have the mindset that we want to be a player and on
the playing field,” he said.

“The risk now is that without enough coordination on China
and other foreign policy issues is that we become the playing
field and we’re not a player,” he said.
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(Reporting by Brenda Goh and Lananh Ngyuen; Additional
reporting by Divya Chowdhury and Mark John; Editing by Alex
Richardson)