(Yicai Global) May 19 -- China's economy has seen a strong recovery after the country eased its Covid-19 controls, helping to restore global supply chains and benefiting the rest of the world, according to Keith Wade, chief economist at UK investment giant Schroders.
London-based Schroders upgraded its outlook on China's economic growth this year once the Covid-19 control measures were lifted, which provided a platform for a very strong rebound in its economic activity, Wade said in a video interview with Yicai Global on May 17.
“We are seeing that coming through now, particularly in the service sector," he said.
“China is a great supplier of goods to the rest of the world,” Wade said. “Now that the economy is bouncing back, we see the supply chains begin to ease, and supply is really being freed up again.”
“That’s very helpful to the US, Europe, Japan, and the rest of the world, because it means that some of the inflation pressures that we had as a result of the bottlenecks in supply chains during the pandemic, those are now being lifted.
“Goods prices are coming down, and that helps to bring down inflation, so that is the bigger benefit of China reopening as far as the rest of the world is concerned," Wade pointed out.
The US interest rate hiking cycle is likely nearing its end, according to Wade. "Interest rates have now got to a level where they are sufficiently restrictive to bring inflation down," he noted, adding that it is dangerous for any central bank to keep raising rates until the economy goes into recession.
“The economy is still pretty firm, companies are still hiring, and consumers are still spending," Wade noted of the US. But the boost from consumers' extra savings stashed during the pandemic is beginning to fade, causing second-quarter gross domestic product to fall, he said, noting that the jobless rate will likely rise 4.5 percent this quarter and jump 5.5 percent by the end of next year.
Wade also remains cautious about risk assets such as equities. "Our view is that the earnings outlook for the corporate sector is generally still too optimistic. We are going be cautious on risk assets until we see a bit of reset of expectations and corporate earnings,” he said.
Editors: Dou Shicong, Martin Kadiev