Once the centre of the outbreak, China is now back on track and set to benefit from the global lockdown.
China was the first country to institute draconian movement restrictions that saw massive hits to manufacturing and trade, as well as its service and entertainment sectors. But while some projections show that China’s Q1 GDP could be in the “-10 per cent to -20 per cent range”, the fact that the slowdown will now be spreading across Europe and America means that China is poised to bounce back stronger and faster than some developed markets.
“The paradox here is that from Q2 China’s growth is likely to accelerate as the rest of the world decelerates,” said Saxo Bank global macro strategist Kay Van-Petersen. “For those who will rightly flag that the US and eurozone will have lower demand for Chinese goods, don’t forget Asia’s demographics and secular consumer spending, healthcare, biotech and infrastructure themes.”
Working in China’s favour is its experience with dealing with epidemics – primarily the SARS outbreak of 2002-03 – and the fact that it does around 50 per cent of its business with Asia.
“Most of Asia benefits more from rising growth in China than rising growth in the US or eurozone,” Mr Van-Petersen said. “Also bear in mind that China will be coming from the lowest of bases: zero.” Construction companies, real estate and infrastructure-linked players should be the first place for investors to look.”
“With an eventual return to the service economy – restaurant chains are once again opening across the country – some provinces are claiming to be almost back to 100 per cent normal.”
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