During January China related ETF witnessed in flowed worth $1.76 Billion which was double the amount received during December 2022. Within the same period, the main equity Index was up by 7.37%. All of this is due to the optimism surrounding the policy shift by the government relating to Covid and also the New Year Festival holidays.
The optimism is obvious given the same policy of reopening has led to economic growth and a large consumer spending. And as per estimates Chinese citizens currently have accumulated over $1.2 Trillion in savings.
But in terms of real data from January there has been nothing but disappointment. Property and car sales are down by 30% yearly.
After looking at recent Google searches, it has been noticed that in recent weeks services-related searches such as flights and hotels have increased substantially. But the searches relating to buying a car or property are still lower with only a small increase.
Thus, the so-called recovery in the economy might not be as estimated. The increase in services would lead to higher energy prices as jet fuel demand rises. But if the housing and exports do not recover then all optimism would quickly reverse in months ahead.
Such a recovery is more of a threat as it would lead to higher prices of energy and raw material along with a slower economy increasing the odds of Stagflation.
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