There has been little sentiment among business leaders about the global economy in recent months, with fears of a recession clouding the outlook and curbing investment. Now, cautious optimism is peeping.
That’s thanks in large part to China, whose sudden lifting of strict coronavirus restrictions late last year is expected to trigger a wave of spending that could ease economic weakness in the United States and Europe.
“The reopening of China has to be the main event and will be the main driver of growth,” Laura Cha, president of Hong Kong Exchanges and Clearing, he said on Tuesday at the World Economic Forum in Davos, Switzerland.
That’s an assessment shared by many others attending the annual gathering of executives, billionaires and politicians in the Swiss mountain resort, in contrast to a WEF survey of chief economists released on Monday that showed two-thirds of them I think a recession in 2023 is likely.
Douglas Peterson, chief executive of S&P Global, said that despite his expectations of a shallow recession in Europe, the United Kingdom and the United States this year, China’s more relaxed approach to the coronavirus — after three years of strict quarantines, closed borders and aggressive testing — would help offset global pain.
“There’s pent-up savings, there’s pent-up demand, so we expect China to see very strong growth, particularly later in the year,” Peterson said, adding that he expects “net growth globally this year.”
China’s zero-covid policy hampered global growth in 2022. The world’s second-largest economy grew by just 3%, one of its worst results in nearly half a century. But Liu He, the vice-premier, said in an opening speech in Davos on Tuesday that the reopening of the country would spur a revival of activity and economic development.
“If we work hard enough, we are confident that in 2023, China’s growth will most likely return to a normal trend and China’s economy will experience significant progress,” Liu said.
The expected increase remains difficult to quantify. In the short term, China is in the grip of its worst coronavirus outbreak, keeping many people at home and emptying shops and restaurants in recent weeks. Future waves could have a similar effect. (Liu said Tuesday that the Covid situation is “stabilizing.”)
The splurge by Chinese consumers and businesses could also reignite inflation if demand for fuel and agricultural products pick up dramatically.
However, for many, the change in the situation in China is a bright spot.
“I expect a solid growth number for China in 2023,” said Kevin Rudd, president of the Asia Society and former prime minister of Australia.
Those eager for an upbeat message also point to a warmer winter in Europe, easing fears of an energy crisis and a growing belief that inflation in the United States has peaked.
“I think the economy surprises us quarter after quarter,” Mário Centeno, a member of the European Central Bank’s governing council, said on Tuesday of the situation in Europe. “Maybe we will be surprised in the first half of the year.”
However, preventing a global recession is not a given.
With uncertainty over exactly how China’s reopening will play out, questions remain about how high central banks will raise interest rates, how long they will keep them there, and how much this will slow economies like the United States.
Russia’s war in Ukraine is another constant source of instability. A European ban on Russian diesel comes into force next month, threatening to keep prices of the vital fuel at extremely high levels.
And while inflation is easing, Christian Ulbrich, chief executive of commercial real estate giant JLL, told CNN he’s concerned about where it will stop — especially given the trend toward bringing supply chains closer to home, which could reduce companies’ exposure to geopolitical risks, but increase their costs.
If inflation stays between 4% and 7%, it will be “painful for many industries,” he said.
The World Bank warned earlier this month that any new shock – such as a sudden rise in inflation or a central bank policy mistake – would likely trigger a second recession this decade.
— Juliana Liu contributed reporting.