The long-awaited China reopening has already sparked a rebound in the country’s equities and may have helped broader markets as investors consider the opportunity from increased mobility and spending. Europe is one of China’s largest trading partners, so could the relaxation of restrictions in the region be disproportionately beneficial for European companies?
Despite rising Covid rates in December, China has continued a rapid course of relaxation of travel restrictions. The country’s heightened controls and zero-Covid policy had supressed mobility and travel, creating a huge amount of potential pent-up demand. Indeed, the Chinese Ministry of Transport said that it expects more than 2 billion passengers to take trips over the 40-day period of the Lunar New Year, an increase of almost 100% year-on-year, reaching 70% of trip numbers in pre-Covid 2019.
The Lunar New Year is also an important time for gift giving. Greater mobility is therefore expected to spark a change in consumption. Chinese household savings increased significantly during the lockdowns in 2022, with estimates that one third of household income was saved over the course of the year. This increased savings rate, alongside a reduction in household new loans, helps build a picture of significant pent-up demand and available money.
China households savings grew most last year
(China annual rise in deposits, Rmb trillions)
*Source: FT, PBOC. (Other includes fiscal savings, financial institution deposits and government savings)