China’s reopening overwhelmingly positive to tackle inflation

OECD Secretary-General Mathias Cormann on Monday said China’s reopening is “overwhelmingly positive” in the global fight to tackle surging inflation.

“We certainly very much welcome the easing of Covid related restrictions in China,” Cormann told CNBC’s Joumanna Bercetche at the World Economic Forum in Davos, Switzerland.

“Over the short term, it will come with challenges and we’re seeing heightened levels of infection which are likely to have some short-term impacts,” he added.

“But over the medium to longer term, this is a very much a positive in terms of making sure that the supply chains function more efficiently and more effectively, making sure that demand in China and indeed trade more generally resumes in a more positive pattern.”

China abruptly ended most Covid controls in early December, leading to a surge in infections among the population of 1.4 billion.

Beijing reported on Saturday that almost 60,000 people with Covid had died in hospital since the country dropped its strict Covid restrictions last month, a sharp increase from previous figures.

China’s reopening, alongside a flurry of positive data surprises, has been cited by economists in recent weeks as a reason to upgrade their previously gloomy forecasts.

“One of the drivers of inflation was very much the supply shock related to global supply not being able to keep up with global demand … as swiftly as was required,” Cormann said.

“And so, China coming back into the global market in earnest and supply chains functioning more efficiently will help bring inflation down. Clearly, this is overwhelmingly positive.”