China's Easing of Quarantine Measures is a 'Double-Edged Sword'... "Short-Term Setback but Will Accelerate Global Economic Recovery"

Strengthened Entry Restrictions Worldwide Amid China's With-Corona Policy
COVID Cases Could Exceed 70,000 if Korean Tourism Increases Significantly
However, Transition Period Expected to Aid Domestic Economic Recovery

There is an analysis that China's easing of COVID-19 quarantine measures could be a 'double-edged sword' for our economy next year. While China's economic reopening is positive for our tourism industry and exports, if COVID-19 spreads uncontrollably again as a result, it could instead hasten an economic recession. Experts predict that in the short term, the increase in confirmed cases may cause significant domestic and international economic disruptions, but in the mid to long term, the recovery of the Chinese economy will benefit not only our domestic economy but also the global economy.

If Chinese Tourists Increase...Concerns Over Sharp Rise in Domestic Cases

According to industry sources on the 30th, as Chinese authorities recently shifted their quarantine policy from 'Zero COVID' to 'With COVID,' there is growing hope that this could aid the sluggish recovery of our economy, but concerns remain that it is too early to be complacent. With the upcoming Chinese New Year, the largest holiday in China, there is a high possibility that Chinese tourists, who had been restricted from traveling, will flood overseas. In response, major countries such as the United States have been imposing entry restrictions to prepare for the spread of COVID-19.

When China begins fully lifting COVID-19 quarantine measures from January 8 next year, the number of Chinese tourists entering our country is expected to increase significantly. According to the Chinese travel site Trip.com, overseas hotel bookings by Chinese tourists at the end of January next year have increased about sixfold compared to last year, with target cities concentrated in Asian countries such as Seoul, Tokyo, and Bangkok. This could lead to increased sales in domestic travel, tourism, accommodation, and food industries, but it could also further increase the number of COVID-19 confirmed cases, which recently surged to over 70,000.

Experts foresee that China's 'With COVID' policy could cause short-term economic contraction. In China, the shortage of medical facilities and personnel is severe, making it difficult to respond to a sudden surge in confirmed cases, which could lead to weakened consumer sentiment and policy confusion, worsening the economies of neighboring countries. However, some opinions suggest that once this transitional period passes, the Chinese economy will revive and have a positive ripple effect on our economy.

Jung Kyu-chul, head of the Economic Outlook Office at the Korea Development Institute (KDI), said, "The economy may contract for about 2 to 3 months due to a surge in confirmed cases, but after this period, if more than six months pass, the Chinese economy will enter a recovery phase and help our economy as well." Our country also experienced a short-term increase in confirmed cases earlier this year during the easing of quarantine measures, but afterward, private consumption increased significantly as fear subsided, leading to a recovery phase.

Economic Vitality Expected After Transitional Period

Hwang Se-woon, a research fellow at the Korea Capital Market Institute, explained, "Although there may be issues with the speed, China will inevitably pursue a 'With COVID' policy going forward," adding, "Industries highly dependent on China could see increased business performance." In particular, exports of memory semiconductors and displays could increase domestically. Semiconductor performance had significantly declined due to global demand reduction and China's lockdowns, but the Chinese market is expected to be a turning point.

Kang Sung-jin, professor of economics at Korea University and president of the Korean International Economic Association, said, "Since the severity of COVID-19 has weakened compared to the early stages, even if confirmed cases increase, it will not cause a serious shock to the US and our economy," adding, "The easing of China's quarantine measures will be a plus for our economy and not a minus." Shin Seung-woong, a researcher at Shinhan Investment Corp., also said, "Although it is difficult to predict, Chinese authorities expect the spread of COVID-19 to peak around the Chinese New Year," and explained, "Economic activities are expected to recover rapidly from mid-February next year."

However, some voices suggest that US-China tensions could act as a variable. The US government imposed export restrictions on Chinese companies this year, and the market expects this atmosphere to continue next year, causing international instability. The Bank of Korea recently pointed out in its 'Risk Factors for Next Year' report that "If fragmentation triggered by US-China trade conflicts intensifies, countries like ours, which actively trade with both the US and China, could suffer greater losses."

On the 23rd, a nurse was carrying an oxygen tank at a fever clinic in Beijing, China. [Image source=Yonhap News]

Foreign Media: "Short-term Negative, but a Positive for Accelerating Global Economic Recovery"

Foreign media, citing experts, also forecast that China's economic reopening will cause short-term supply chain disruptions but will be a positive factor accelerating global economic recovery in the long term. Li Sheng Wang, a Goldman Sachs analyst, said in an investor note on the 28th (local time), "The spread of infections, labor shortages, and increased supply chain disruptions due to China's easing of quarantine measures could weaken growth momentum in the short term." He added, "China's rapid shift in quarantine policy without adequate preparation is causing infections to spread quickly, and the resulting confusion could peak in early January." Samer Samana, chief analyst at Wells Fargo, predicted in an interview with Bloomberg TV, "China's economic reopening will push up oil prices and ultimately lead to inflationary pressures," adding, "China-driven inflation could narrow the Federal Reserve's room for maneuver in the first half of next year."

On the other hand, they offer a rosy outlook for China's and the global economy in the long term. The improvement in demand from China's full economic reopening is expected to act as a buffer, allowing the global economy to experience only a mild recession or a soft landing. Daniel Lacalle, chief economist at global asset management firm Tressis Gestion, cited China's full economic reopening as the most positive event the market can expect next year. He said, "China's economic reopening will serve as a major driver of global economic growth," especially benefiting the economies of Germany and France, which have high export shares to China.

Goldman Sachs predicts that the pent-up demand for overseas travel by Chinese people, which has been restricted for three years, will greatly benefit neighboring countries. In a recent report, Goldman Sachs forecasted that Hong Kong and Singapore, which are physically close to China, will grow by 2.7% and 1%, respectively, fueled by Chinese tourism demand, while Taiwan, Australia, and Malaysia are expected to see growth of 0.4%.

This content was produced with the assistance of AI translation services.