China’s COVID Wave Abates, Clearing the Way for a Post-Lockdown Burst in Consumer Spending

Much has been made of China’s re-opening, which spurred commodities prices higher and brightened growth prospects for the global economy. But sorting out how significant the recovery will actually be, as well as how expedient, is key in understanding the full impact of a Chinese resurgence on asset prices.

Barring the emergence of any serious mutations in the strains of COVID present in China, it seems the country has finally passed through the post-opening surge in COVID-19 cases and deaths that was inevitable once it phased out its “zero-COVID” policy. That likely put a drag on the initial phase of the recovery and could continue to linger on the minds of some Chinese consumers. However, data indicates that China’s households are now sitting on a mountain of savings and it may only be a matter of time before that cash is unleashed.

Related ETF: iShares MSCI China ETF (MCHI)

Following one of China’s worst economic performances in nearly half a century, growing by an abnormally small 3.0% in 2022, the country appears ready to emerge from lockdown. That much has been obvious for some time, but concerns have lingered about how palpable that emergence would be, considering the country has had to wade through a resulting spike in COVID-19 cases that may have thus far delayed the full impact of its re-opening.

Per data from the CDC, cited by Bloomberg, there were 912 fatalities linked to COVID-19 at Chinese hospitals between February 3 and February 9, down significantly from 3,278 a week earlier. When the virus’s impact peaked on January 4, data recorded as many as 4,273 COVID deaths in a single day. As of yet, no major mutations have been recorded in the strains of the virus predominant in China, meaning that a more deadly or treatment-resistant variant has not emerged. That tracks with what the rest of the world is experiencing, as there hasn’t been a major mutation to challenge the well-known Omicron variant in more than a year.

That is good news for everyone, but China was in particular need of relief – for their people and economy alike. The fatigue and stress enacted on the population by stringent an prolonged Zero COVID policies was only the latest catalyst that sparked a rare wave of protests in China throughout the final quarter of 2022. MRP has covered several waves of civil unrest that had broken out on the Chinese mainland throughout the past year-and-a-half, as people took to the streets to protest billions of dollars in frozen bank deposits and crumbling real estate investments.

In our July 2022 Intelligence Briefing, Chinese Banks Struggle to Gain Footing Amid Slow Loan Growth and Rising Uncertainty. As of the end of May, we noted that the amount of frozen deposits across several banks in China’s central Henan province grew close to 10 billion yuan ($1.49 billion) as protests begun to break out in the region. Those protests…