Why China isn’t about to save the world economy
The earlier and faster than expected ending of zero–Covid restrictions in China bodes well for the global economy and adds to the recent run of positive news. But we‘re sceptical that China will save the world from recession, and we don’t think the likely increase in Chinese demand justifies recent moves in prices for metals and other commodities.
We recently revised up our GDP forecast for China due to the ending of Covid restrictions, but we estimate the boost to the world economy will be small. Simulations using our Global Economic Model suggest the level of world GDP by the end of 2023 will be just 0.15% higher.
Even this mild bump might exaggerate the positive spillovers from China to the rest of the world, given that its domestically-focused service sector will be the key beneficiary of the policy shift.
