Whatās Going On Here?Data out on Monday shows Chinaās economic dropoff may finally have reached a turning point. What Does This Mean?Chinese Covid cases are easing up and the country is back in business: Beijing greenlit in-person store and restaurant services on Monday, while Shanghai ā which has been locked down for the best part of two months ā continued with a reopening that kicked off last week. Itās already having the desired effect: data from the Dragon Boat Festival weekend showed that tourism spending was only down 12% on last year ā a drop, sure, but way less than the 43% plunge recorded over the last national holiday in May. Some economists think itās a telltale sign of a recovery, and they suspect itāll only pick up pace from here on out. Investors seem to agree: they sent the countryās stock market up around 2% on Monday. Why Should I Care?Zooming in: Donāt count your chickens.
But this isnāt going to be an overnight recovery, with separate data on Monday showing that Chinaās services sector shrank more than expected last month on the back of still-dwindling supply and demand. People living in cities like Beijing, after all, require negative Covid tests as often as every 48 hours to access public venues, and thereās always the very real possibility of yet more lockdowns.
The bigger picture: Chinaās win is our win.
The Chinese government has recently introduced measures to bring production back stronger than ever, which economists think will also reduce costs. That should allow manufacturers in āthe worldās factoryā to lower the amount they charge their overseas customers, which could in turn encourage those companies to reduce the amount they make us pay. That might be why some economists are hoping that Chinaās efforts to get back on its feet could help bring down global inflation. | 