The radical turnaround in Covid policy should worry investors more, warns Handelsblatt editor Frank Wiebe.
(Photo: Getty Images, Private)
On December 20 alone, 37 million Chinese were infected with Corona. This is reported by the Bloomberg news agency, citing the country’s top health authority. Within a week there should have been around 248 million cases. The number of deaths is still unclear.
Numbers of this kind make it clear: China’s turnaround in Covid policy is a disaster. Videos from clinics where the dead are lying in the aisles wrapped in plastic are circulating again on social networks.
After the government in Beijing repeatedly imprisoned millions of citizens in frequent lockdowns, it is now giving free rein to the virus, which is now encountering a poorly protected, previously little immunized population.
This shows that China is a risk that may still be underestimated on the markets. The country as a workbench and major customer in the world cannot be replaced as quickly as Russia as a supplier of raw materials. If the system becomes unstable and thus potentially aggressive, a very large crisis will arise.
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When it comes to risks for the markets in the new year, the focus is sometimes still on inflation or an impending recession as a result of the tough monetary policy. Most price-relevant news comes from this topic. On the geopolitical level, the war in Ukraine plays the main role, with the tensions between China and Taiwan and China and the USA playing in the background; to the trade dispute between the USA and Europe.
Ultimately, the Chinese system is unstable
China is also in focus, but possibly not clearly enough. The World Bank has already lowered its growth forecasts for the country: from 4.8 to 2.7 percent for the end of the year and from 8.1 to 4.3 percent for the coming year.
The long-term anti-business policy of the Chinese government, which wants to consolidate its claim to power over large domestic corporations such as Alibaba or Tencent, depressed the prices of Chinese shares in particular. In connection with Covid, there was hope that after the winter, the disease would lose strength and the economy would normalize.
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But the new Covid policy, which was also launched for economic reasons, once again makes it clear how unpredictable and ultimately unstable the system is.
In past financial crises, investors have often placed a lot of trust in the leadership in Beijing – according to the motto: They control everything, nothing works. But the notion, sometimes shared in the West, that dictatorships are more stable than democracies is nonsense.
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Just before Christmas, the stock exchanges ignored all these risks and remained calm. The German leading index Dax, which closed slightly higher at 13,941 points on Friday, is also struggling with the important mark of 14,000 points at the beginning of the new stock exchange week.
Wall Street was also in good spirits ahead of the Christmas holiday. New US data showed inflation and consumption cooling at the same time.
The days leading up to the end of the year could bring movement again, but this would only have a limited signal effect due to the mostly low turnover.
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