IN FOCUS6-8 min read

What will the Year of the Rabbit bring for investors in China?

As China drops its zero-Covid policy, our experts consider what China’s New Year, starting 22 January, has in store.

Rabbit ornament

Lunar New Year starts on 22 January and brings a Year of the Rabbit. Rabbits are a symbol of good luck in China. But after a difficult 2022 for Chinese assets, will investors in China be more fortunate in 2023? We asked our experts for their views.

“China’s economy should do better sooner” – David Rees, Senior Emerging Markets Economist:

"We expect China’s economy to stage a recovery in 2023. Our baseline forecast is for Chinese GDP growth to increase to 5% from 3% in 2022.

"The swift removal of Covid curbs should mean the economy will start to do better sooner. The service sector in particular should benefit, and this could mean that the economy grows faster than our current forecast.

"Meanwhile, infrastructure spending was buoyant in 2022 and should underpin growth for a while longer as policy remains supportive. Housing indicators may have started to find a floor and could stage some recovery in 2023 from a very low base."

“Renewed outbreaks of Covid remain a risk” – Louisa Lo, Head of Greater China equities:

"Chinese equities will continue to be influenced by the global macroeconomic backdrop – i.e., the extent of rate hikes and the shape of the economic slowdown in the US and Europe. A peak in the US rate cycle and a softer US dollar should help liquidity for emerging markets.

"China has recently removed all major hurdles to its re-opening post Covid faster than expected. This is expected to provide substantial support to the recovery in consumer spending. In turn, this should support domestic earnings in many sectors of the economy. However, the exit from the zero-Covid policy remains a risk amid renewed outbreaks of the virus and, consequently, economic momentum could be volatile.

"The government has also moved to further support the property market. However, property sales will need to improve for the sector to more fully recover and, more importantly, for investors to accept that systemic risks are declining.

"Despite the recent rebound, we continue to see solid valuation support for equities in China and Hong Kong."

“Greater stability for China’s balance of payments” – Julia Ho, Head of Asian Macro, Fixed Income:

"After the abandonment of China’s zero-Covid policy, border re-opening is going to be a bumpy ride. We are optimistic that the slow normalisation of outbound tourism should help to constrain the deterioration of the balance of payments and stabilise the Chinese renminbi. (The balance of payments is the difference in total value between payments into and out of a country over a period).

"This currency stability, along with muted inflationary pressures and a modest pace of economic recovery, should bode well for Chinese government bonds because monetary policy can stay accommodative."

“The worst of the slowdown is over, but liquidity and cashflow are key” – Peng Fong Ng, Head of Credit, Asia:

"Across Asia, credit valuations are attractive and we like Asian investment grade credits. This segment offers attractive risk-adjusted income. (Investment grade bonds are the highest quality bonds as determined by a credit rating agency; high yield bonds are more speculative, with a credit rating below investment grade).

"Asia high yield credit remains vulnerable. A focus on liquidity and cashflow positions will be key. This calls for a selective approach, especially for China property.

"We think the worst of Chinese slowdown is likely over. While the growth recovery path may be volatile, we see opportunities in selected over-penalized issuers, such as selected technology, media and telecom names."


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