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Buyers beware: China’s economic recovery may be painful and perilous

While a bullish consensus is building on Chinese equities, we believe a share price correction could be in the offing as growth fails to meet lofty expectations

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    • China’s current Covid-19 wave has been confined to the urban areas so far, with rural areas remaining largely unscathed. This is about to change.
    • China’s current Covid-19 wave has been confined to the urban areas so far, with rural areas remaining largely unscathed. This is about to change. PHOTO: AFP

    You Weiren

    Published Tue, Jan 31, 2023 · 04:04 PM

    CHINESE equities have been on a tear in 2023.

    Despite a tidal wave of fresh virus infections, the Chinese government has moved forward with its plans to dismantle the zero-Covid policy that it adhered to for the past three years. Markets welcomed the move. Investors rushed back into Chinese equities as they position for a sharp rebound in economic activity.

    Even though a bullish consensus is emerging for Chinese equities, we prefer to remain cautious as there are reasons to believe that the recent rally may not last.

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