Citi Economists Say Chinese Economy a Safe Haven Due to Central Bank Restraint

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Analysts from Citi have pointed to the Chinese economy as a potential safe haven for global investors, as the financial sectors of Europe and North America are wracked by a slew of bank runs and institutional collapses.

In a note published on Thursday, Citi economists said that China was a “relative safe haven” for investors in 2023, particularly following the lifting of Covid-related controls that were reintroduced last year and the effectiveness of measures to stabilise the real estate sector.

“The activity momentum could pick up further from here, with auto sales improving and property sales stabilizing,” said Citi economists led by Chief China Economist Xiangrong Yu.

China’s position as a growth hedge for global investors could be further enhanced by recent scandals involving Silicon Valley Bank (SVB) in the US and Credit Suisse in Europe, that have cast a shadow of doubt upon the stability of OECD financial systems and led to a sharp decline in banking stocks.

“We have long been discussing our view that China can be a major growth hedge this year – if anything, recent global banking stresses perhaps have strengthened this thesis,” the note said.

Citi analysts further highlighted positive impacts of the Chinese central bank’s comparatively restrained monetary policy stance, which has repeatedly reiterated the need to avoid “flood-style irrigation” even after the onset of the Covid pandemic.

“Perhaps taking lessons from what the U.S. has been going through in recent years, the PBOC has been prudent in easing even during the pandemic era and may quickly switch to a wait-and-see mode once growth is back on track,” the economists at Citi wrote.