- As zero-Covid hammers the Chinese economy, Beijing is increasingly realizing that it can’t just talk a good game, but has to put some real numbers behind the message, it’s pumping a whopping US$5.3 trillion back into the system.
- In other words, if the Chinese economy can’t shake the funk from its zero-Covid dunk, Beijing still has plenty of room to spend more.
For weeks, investors had grown weary of the endless rhetoric out of Beijing on how the Chinese government would do whatever it takes to support the economy, but without any clear or concrete plans on what would be done.
As zero-Covid hammers the Chinese economy, Beijing is increasingly realizing that it can’t just talk a good game, but has to put some real numbers behind the message, it’s pumping a whopping US$5.3 trillion back into the system.
The figure is based on Bloomberg’s calculation of monetary and fiscal measures so far and roughly equates to around a third of China’s US$17 trillion economy, but pales in comparison to the stimulus in 2020 when the pandemic first hit.
In other words, if the Chinese economy can’t shake the funk from its zero-Covid dunk, Beijing still has plenty of room to spend more.
That assurance that Beijing is willing to dig deep has seen Chinese shares rally this past week, even as the rest of the world has struggled, but whether or not that resilience is durable remains to be seen.
There continues to be a flood of headwinds facing the Chinese economy, not least of which is its insistence on zero-Covid policies.
Periodically locking down entire cities is not good for confidence or business.
Even as cities like Shanghai look to return back to normal, another case or cluster could roll back any move to lift restrictions and plunge the financial center back into another lockdown.
Arbitrary policy moves as well as the reluctance of Chinese borrowers to make good on their dollar-denominated offshore bonds also means that much of the global fund flows into China may have left for the foreseeable future.
Making matters worse, the refusal of Chinese President Xi Jinping to condemn the Russian invasion and Beijing’s apparent cozying up with Moscow, risks creating an axis on the so-called “World Island” that could subject global investors in China to higher political exposure than many would feel comfortable with.
Spending more on infrastructure and loosening monetary policy also won’t do anything for Chinese consumer sentiment.
China has so far refused to accept foreign mRNA vaccines, which have proved to be the most effective, and so it’s hard to see an end in sight for zero-Covid lockdowns, making it unclear that Beijing can spend its way out of its economic malaise.
