The topic of China’s reopening came up at several discussions, both public and private, as China’s economic tsar Liu He made a big pitch for foreign investment in the ski resort of Davos on the first visit abroad by a high-level Chinese delegation since Beijing shelved its three-year-old zero-COVID policy.
While Liu said that people in China were recovering faster than he had expected from COVID-19 after the dismantling of curbs unleashed a giant wave of infections, many executives with businesses in China said they were still forecasting a bumpy few months before things start to get better.
Joe Kaeser, chairman of Siemens Energy, said during an interview with the Reuters Global Markets Forum that the upcoming Lunar New Year week-long holiday, when millions of people are expected to travel home to see family, would be a “super spreader” event.
“The bad news is that there will be a lot of pain and likely fatalities,” he said. “The good news is that once that is over, come summer or fall, China will be moving to the second phase of reform and opening up…That could certainly help the world also grow and ease the pain of a lot of industrial countries, including Europe.”
Among those who warned on the reopening impact’s on inflationary pressures were the International Monetary Fund Deputy Managing Director Gita Gopinath and European Central Bank President Christine Lagarde, as well as Larry Fink, the chief executive of the world’s largest asset manager BlackRock.
“It is estimated that the Chinese economy can grow 5% or 6% in the third and fourth quarter. If that’s the case, are they going to demand an extra 500,000 or million barrels of oil?” Fink said at an event on the forum’s sidelines.
“At the same time, we’re estimating a mild recession in Europe and the United States that offset it. If not, the trends would say we’re going to have elevated energy prices.”
Ngozi Okonjo-Iweala, director-general of the World Trade Organization, pointed out that the reopening could help supply chains work better and also boost consumer demand. “But on the other hand we also have to see what the opening up impact is on the pandemic,” she told a news briefing.
Adjacent to the discussions on China’s reopening was what it could mean for its existing tensions with the United States over issues such as technology, trade and Taiwan, which several WEF delegates expressed concern over.
At one panel, Bank of Japan Governor Haruhiko Kuroda posed a question from the audience to Singapore Senior Minister Tharman Shanmugaratnam on his view on the medium-term future on the economic relationship between the United States and China, commenting that one of his main worries was global fragmentation.
“The current trajectory of that relationship, particularly with regards to the types of restrictions on economic interdependence, and the scale of those restrictions, we’re going to end up with not just a zero-sum situation, but a negative-sum situation,” Shanmugaratnam responded.
“I think both the U.S. and China will be hurt, which doesn’t just mean the national entities but workforces, people will be hurt.”
Mark Rutte, Prime Minister of the Netherlands which has been drawn into a tussle over semiconductors and related supply chains between Beijing and Washington, appealed to his fellow European Union members to do more on coordinating the bloc’s policy towards China.
“It’s not that we have to choose between U.S. and China, we need to have our own policy and our policy should be first of all that we have the mindset that we want to be a player and on the playing field,” he said.
“The risk now is that without enough coordination on China and other foreign policy issues is that we become the playing field and we’re not a player,” he said. For daily Davos updates in your inbox sign up for the Reuters Daily Briefing here. (Reporting by Brenda Goh and Lananh Ngyuen; Additional reporting by Divya Chowdhury and Mark John; Editing by Alex Richardson)