China is Happily Engaging With the Global Economy So Far This Year

Tensions between the US and China may be at an all-time high (some 60,000-feet-of-altitude high, to be precise). And yet, when it comes to commerce that doesn’t involve bleeding-edge semiconductors, the western world and the Middle Kingdom are co-mingling quite cordially.

The first six weeks of the year have seen the most foreign investments into China ever. Meanwhile, Shanghai-based car-sensor developer Hesai Technology became the largest Chinese firm to list publicly in the US in two years on Thursday.

Locked-Down and Out in Shanghai and Shenzhen

Foreign investors have reason to be excited about China’s economy again. President Xi Jinping has finally relaxed the stringent zero-Covid policies that trapped the world’s second-largest economy in a brutal cycle of economically destructive lockdowns and grounded China’s GDP growth down to just 3% last year, lower than 2021 levels. Meanwhile, new economic data published by the country late last month has investors optimistic about the nation’s growth prospects, with manufacturing expanding for the first time in three months. That was enough for rating agency Fitch to adjust its 2023 forecast for China up a full percentage point to 5%.

Consumer brands, in particular, stand to benefit from the end of lockdowns. “We believe the reopening may lead to a V-shaped recovery in the share prices of China’s consumer brands in early 2023. The recovery could be driven by pent-up demand, high savings, and a wealth effect as real estate prices recover,” Xiaolin Chen, international head of investment management firm KraneShares, told CNBC. The upshot is that global interest in Chinese stocks is rebounding from its recent severe lows:

• The CSI 300 — China’s benchmark index for its largest companies — has increased over 13% since the end of October. And so far this year, foreign investors have poured an astonishing $21 billion into Chinese equities— more than double last year’s record.
• “The money has really come back in now that the market has got reassurance that 2023 will be all about growth,” Frank Benzimra, head of Asia equity strategy at Société Générale, told the Financial Times.

Sensor Sensibility: The warm and fuzzies are mutual. While foreigners pour into Shanghai- and Shenzhen-listed companies through the Hong Kong Stock Connect program, exchange executives are hoping Hesai Technology’s forthcoming IPO on the Nasdaq stock exchange will spark a revival of Chinese listings on US exchanges. Think of it as a trial balloon. The company, which supplies autonomous car companies with critical LiDAR laser sensors, climbed as much as 29% following its debut — and closed up 11%. From the looks of it, business leaders regard all this Cold War talk as nothing but hot air.