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China’s economy looks poised for a rebound in 2023, but a lot depends on one variable — the consumer, said investment management firm KraneShares.
“As external demand falls due to an impending recession in the West, China’s economy must rely more heavily on the consumer,” said KraneShares’ international head, Xiaolin Chen.
“We believe the reopening may lead to a V-shaped recovery in the share prices of China’s consumer brands in early 2023. The recovery could be driven by pent-up demand, high savings, and a wealth effect as real estate prices recover,” said Chen.
China’s gross domestic product grew 3 percent in 2022, less than half of 2021’s rate. The country’s zero-Covid-19 policy, worsening relations with the US, as well as the real estate “taper tantrum” in 2022 dampened growth, KraneShares said in a report released last week.
In December, China pledged to make domestic demand an economic priority.
“The fallout from regulatory changes affecting the real estate development industry lingered longer than expected despite a commitment from the government to stabilise the sector,” Chen said.
China’s real estate market slowed down sharply in 2022 as the government tightened restrictions on borrowing by developers.
“Fortunately, reopening and a fresh infusion of capital in China’s real estate development industry have the potential to boost consumer confidence significantly, which would be a catalyst for China markets in 2023,” said Chen.
She noted that internet companies such as Alibaba and Meituan were hit by the tech crackdown, while consumer categories fared better.
“We also encourage investors to take a long-term view,” she added. — CNBC.
Online Reporter