From Breakingviews: Will China’s reopening reassure American investors? A consumption revival would help, but politics is making decoupling the default thesis, says petesweeneypro
, need to reassure shareholders they aren’t wasting money – China has been a drag on Starbucks earnings of late. So when IMF chief Kristalina Georgieva said China’s rebound will account for a third of global growth in 2023, “a welcome lift to the world economy,” that was just what the audience wanted to hear.
However, it is not clear how long it will take for domestic consumption to revive. Although President Xi Jinping’s zero-Covid policy was largely abandoned by December, the relief has been concentrated in battered industries like restaurants and movies so far. Imports, a good indicator of domestic demand, declined 10.2% year on year in the first two months of 2023.
As for geopolitics, there are fewer grounds for optimism, leaving CEOs like Apple’s Tim Cook stuck on a tightrope. In public they must be as polite as possible to President Xi Jinping without drawing Congressional attention; in private they are. Anecdotal evidence suggests even in harmless industries like textiles and market research, decoupling is becoming the default American investment thesis.
That said, nothing builds confidence like profit. If China surprises by dramatically boosting internal demand, U.S. executives and their shareholders will be placated. The rest will be up to politicians and diplomats, which is not, alas, reassuring.Apple CEO Tim Cook on March 25 praised China for its rapid innovation and its long ties with the U.S. iPhone maker, Reuters reported citing local media reports.
The agenda includes speeches by key Chinese officials including Vice Premier Ding Xuexiang and finance ministry chief Liu Kun as well as panels featuring foreign business executives, regulators and financial institutions including the International Monetary Fund.
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