The recent surge of optimism that the world economy would have a soft landing is largely due to China’s decision to ditch its “zero-Covid” policy. Clearly, the reopening has lessened the risks and uncertainty surrounding the outlook.
China’s real GDP increased by 3% overall in 2022 from the previous year, which was the second-worst performance since 1976, the final year of the Cultural Revolution (the worst being 2020, when the pandemic began).
The earlier and faster than expected ending of zero-Covid restrictions in China bodes well for the global economy and adds to the recent run of positive news. But how significant will the spillovers from China’s policy likely be for Thailand and the global economy?
At Davos, Chinese Vice Premier Liu He held a private meeting with leading Western business leaders. One leader quoted Liu as saying that “China is back.” There is a widespread expectation that, once the current outbreak of COVID-19 in China recedes, the Chinese economy will accelerate significantly.
Serious headwinds for China
However, there are serious headwinds for China that could restrain the recovery. These include the troubled property market, weakness of external demand, poor demographics, and efforts by Western governments to restrict trade and cross-border capital flows with China, according to a Deloitte analysis.
Stronger service demand will have some beneficial spillover effects on the rest of the world, especially in terms of outbound tourism, but Asian tourist destinations…