China’s COVID-19 policy ‘pivot’ has the potential to be a major driver of asset prices in 2023. We see a possible end to all COVID restrictions in 1H23 as economic challenges and ongoing social unease will likely accelerate change.

While the reopening will be disruptive given the speed at which the central government has eased restrictions, we expect consumption to rebound sharply and boost GDP by Q2 2023. Importantly, as China pursued a very different policy response to COVID-19 from most of the West, it is not experiencing high inflation or rising interest rates. This gives Beijing a significant runway for stimulus.

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