A Reopening China is More Bust Than Blockbuster

Image Credit: Getty Images, awdebenharn.

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Hey China, wake-up sleepyhead!

Western companies were no doubt licking their lips as Beijing began to drop its stringent zero-covid policies late last year. But five months into 2023, and it’s clear the post-pandemic era’s sleeping giant is still hitting the snooze button.

The Silk-Pajama Road

The prospect of 1.4 billion consumers returning to the economy en masse was quite tantalizing. But the reality proved much different. The WHO only just declared that covid is no longer a global emergency last Friday, after all. In China, the end of zero-covid policies has spurred, at least initially, lots of covid cases. As the arguably draconian policies sunsetted last December, the country saw a massive spike in cases, headlined by 41 million new cases the week of December 19.

And with a covid surge comes a subsequent economic hangover — labor shortages, inconsistent business hours, and anxious consumers. The proof? Just look at Western companies’ most recent earnings reports, especially those in covid-sensitive sectors:

  • Starbucks said economic growth in China had started to slow, especially with regard to international travel. Finnair dittoed that notion, adding the nation’s recovery has proven “slower than many anticipated,” while Hilton said “China won’t contribute” what the company had hoped.
  • Meanwhile, when Estée Lauder said last week that the market’s economic recovery has been more gradual than expected, investors reacted by delivering the company’s largest-ever single-day share price plummet.

“There is a problem with people thinking the pullback of Covid-zero measures is equivalent to the economy reopening, which it is not,” Leland Miller, CEO of research firm China Beige Book, told The Wall Street Journal in December. Half a year later, that still holds true.