China’s re-opening of its mainland market is creating mixed reactions among economists and business leaders around the world. On one hand, the International Energy Agency has forecast that global oil demand will hit an all-time high this year, with China accounting for almost half of the increase. This could lead to a surge in inflation, a top challenge for advanced economies. On the other hand, Goldman Sachs and Morgan Stanley have raised China's GDP growth forecast for 2023 to more than 5 percent, boosting the outlook for Chinese listings in Hong Kong, Malaysia, Thailand, and Singapore.
The re-opening of China's mainland market was relatively subdued, however, with the Shanghai Shenzhen CSI 300 rising less than 0.5% and the Shanghai Composite eking out less than a 0.2% gain. The appreciation of the yuan by 0.5% was largely in agreement with the offshore yuan's performance. Meanwhile, Hong Kong's Hang Seng tumbled 2.75%, to give back most of last week's gains.
The Federal Reserve, European Central Bank, and the Bank of England are expected to hike their interest rates in the coming months, which could help to ease inflationary pressures if China’s re-opening does indeed lead to a surge in global demand. Nevertheless, the implications of China’s re-opening remain a cause for concern among policymakers, as the effects on inflation are still uncertain.
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