The tyrant is in full panic reversal mode. What an amazing outcome from a few lousy street protests. Western leaders should be watching this great interest. To prevent a Taiwan war just threaten the Chinese economy with sanctions and the tyrant will fold like a cheap suit.
The COVID-zero reversal is accelerating. Goldman:
China Covid policy: rising risk of an earlier reopening
We think the Chinese government’s unveiling of “10 measures” today to further loosen its Covid policies further paves the way for an eventual exit from the country’s zero-Covid policy (ZCP). Although our baseline remains that the Chinese government will abandon ZCP in April after sufficiently vaccinating its elderly population over the next few months, we think these measures, along with others rolled out recently, suggest increased risk of an earlier reopening. Using our recently constructed reopening scenario analysis, we find that an immediate reopening with little (10% probability) or some (35% probability) policy restrictions would boost growth by 1.1pp and 0.3pp, respectively, in 2023 relative to our baseline of no reopening until 2Q23, although both scenarios would imply relatively lower growth in 2024. By contrast, in a scenario in which the ZCP remains in place throughout most of 2023 (5% probability), we estimate growth could be 1.8pp lower than our baseline in 2023, but 1.4pp higher in 2024. Once China does reopen, we think that Chinese and EM equities, commodities, and many commodity-linked and North Asian currencies could potentially significantly benefit. We also think that the broad Dollar could weaken, supporting our view that earlier or deeper China reopening is a potentially meaningful catalyst for a return to USD weakness. And we think that some upward pressure on DM yields and curve flattening, along with a shift in recent correlation patterns between yields, equities, and FX, could also occur.
And here comes the kitchen sink:
Chinese authorities may further soften their stance on property policies at its key economic meeting next week after the Communist Party’s top decision-making body said it will seek a turnaround in the economy for 2023, according to people familiar with the matter.
The annual Central Economic Work Conference, where policy makers discuss next year’s goals including the gross domestic product target and the budget deficit, will start on Dec. 15, according to people with knowledge of the arrangement, who asked not to be identified as the information is private.
Officials plan to play down the significance of “housing is for living, not for speculation,” the people said. That phrase has been consistently used by officials since 2016 to signify the government’s determination to curb speculation in the sector, rein in soaring home prices, contain debt risks and reduce excess supply in lower-tier cities. The authorities will aim to reverse the downward trend in property sector and resume normal operation of the industry, one of the people said.
They may also declare the nation’s yearslong campaign to deleverage its property market is completed with the focus for next year on boosting consumer demand, one of the people said. The discussions are ongoing and subject to change, the people said.
Iron ore didn’t look back:
It looks like we will now get some kind of pent-up demand reopening the property boom. If they declare the deleveraging campaign for developers over then it may even last.
I do not think that it will resemble the magnitudes of yesteryear but that is a thought for another time.
Iron ore is going to run hard through Q1.
