China`s Reopening of its Economy

For exactly 1016 days because of the Covid-19 China has closed its borders to the world.

Foreign people left the country at the start of the pandemic, which caused a shrink in

the business cycles, people stopped joining outside China events, and the economy was

left by itself. However, on January 8th, 2023, China re-opened its borders, abandoning

the last remnants of its “zero-covid” policy. This decision is expected to cause a renewal

of commercial, intellectual, and cultural contact and will have huge consequences,

mostly benign.

The first immediate change was the boost in China's domestic economy. Its GDP is

expected to grow as much as 6.5%, which the normal and ideal rate of GDP is usually

2% to 3%. China`s reopening is not only anticipated to raise the domestic GDP but also

the global GDP by 1%.

There are three main factors that will cause a change in the global economy by China:

1. Increase in domestic demand: China's reopening is expected to have a positive

impact on domestic demand as consumers regain confidence and start spending

again. The country's economic recovery has been driven in part by government

stimulus measures, such as tax cuts and infrastructure spending, which have

helped to boost consumer confidence and support employment. As the

workplaces start to open, household incomes would likely increase, which will

cause a positive shift in the aggregate demand of the economy.

2. Increase in International Travel: China's reopening is expected to have a

significant impact on international travel. As the country has implemented

measures to control the spread of COVID-19, it has gradually relaxed restrictions

on international travel, allowing some foreigners to enter the country for

business or other essential purposes. This could have a positive impact on the

tourism industry, as well as other sectors that rely on international travel, such

as aviation and hospitality. However, it is still important to note that the

emergence of new variants of the virus can again cause fluctuations in the

restrictions of international travel.

 3. Increase in Commodity Demand: China's reopening is likely to have a

significant impact on commodity demand. As the world's largest consumer of

many commodities, including metals, energy, and agricultural products, any

changes in China's demand can have a major impact on global commodity prices.

Even though for now it seems like the global economy will start going back to normal as

China one of the largest suppliers will start going back to normal there are some risks

that the global economy may face. Overall the most potent risk that the global economy

can face by China`s reopening is a higher-than-expected inflationary rate, which will rise

the ongoing economic crises globally.