While the US Beige book was a portrait of an economy at a virtual standstill, China reopening paints a picture of an economy on the verge of the hustle and bustle.
The clear message to start 2023 has been clear as a whistle: while last year was about Fed and ECB normalization, this year will be about China and Japan normalization, which should continue to drive Asia’s fortunes higher in 2023.
In 2022, Asian currencies underperformed; this year should see Asian currencies lead the charge and drive equity market inflows, especially from US investors that are profoundly worried about the erosion of the US dollars purchasing power.
Covid infections appear to have peaked in China recently, and high-frequency mobility indicators show a continued rebound in January. Still, there will be ample post-lockdown scarring effects; however, consumption will be the primary economic healer. That impulse is determined mechanically by income and savings, where the accumulation of household savings is massive and has risen fast over the past three years. It will ultimately supercharge virtually all ASEAN economies when Chinese consumers start spending.