China’s reopening overwhelmingly constructive to struggle inflation

OECD Secretary-General Mathias Cormann said on Monday China’s reopening was “overwhelmingly positive” in the global fight against rising inflation.

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

“It will come with challenges in the short term and we are seeing elevated levels of infection that will likely have some short term implications,” he added.

“But over the medium to longer term, this is very positive to ensure supply chains function more efficiently and effectively to ensure demand in China and trade generally resumes in a more positive pattern. “

China abruptly ended most Covid controls in early December, prompting a spike in infections among its population of 1.4 billion.

Beijing reported on Saturday that nearly 60,000 people with Covid had died in hospital since the country lifted its tough Covid restrictions last month, a sharp rise from previous figures.

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

“One of the drivers of inflation, very strongly, was the supply shock caused by global supply not being able to keep up with global demand … as fast as needed,” Cormann said.

“Therefore, China’s serious return to the global market and more efficiently functioning supply chains will help bring down inflation.” This is clearly overwhelmingly positive.”