Only a year ago prominent voices were calling China “uninvestible”. Yet the country has several macroeconomic and financial peculiarities that now look like strengths
America’s worries have quickly spread elsewhere, too. Emerging-market investors, for example, have begun to rethink the countries in which they invest, scrutinising them through-tinted spectacles. They are wondering which markets are most exposed to financial jitters and slower growth in America, and which share similar vulnerabilities.
Needless to say, the country poses home-grown dangers as well. Uncreditworthy property developers remain a financial concern. The Communist Party’shas terrified its best-known entrepreneurs and wealthiest families, many of whom are eager to move money out of the country. The appearance of Jack Ma, founder of Alibaba, in his home town this week perhaps offers some reassurance.
And yet China has several macroeconomic and financial peculiarities that look like strengths in the current turmoil. The eccentric commitment to the country’s zero-covid policy has thrown its economic cycle out of sync with the rest of the world. It thus represents a natural “growth hedge”, according to Xiangrong Yu, Xinyu Ji and Yuanliu Hu of Citigroup, a bank. China may be the only big economy that grows faster this year than last, they point out.
Bond prices did wobble during the chaotic abandonment of the zero-covid policy. But in China, unlike in America, Europe or most emerging economies, yields remain lower now than at the end of 2020. Moreover, instead of triggering a run on the banks, the bond sell-off accelerated a run into them. People who lost money on wealth-management products, which invested in bonds, fled into deposits. The economists at Citi reckon that household deposits now exceed pre-pandemic trends by 15.4trn yuan .
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