It is not everyday that a tower in one of China’s largest cities is displaying a sign telling residents they are responsible for their own health. It is not every week where protests in China reach levels not seen since 1989. It is not every month that lending in China falls to a five-year low. And it is not every two months where inflation dwarfs retail sales growth in China in back-to-back months. However, these are all events that have occurred recently, and together we expect they will finally be helping to usher in a significant change in China. We have cautioned for months in our Weekly China Reports and Weekly Dry Bulk Reports not to be too bullish if expecting an imminent Chinese reopening, but finally we do expect that a dramatic change is coming. In our view, the government has no choice but to shift its policy towards one where the nation should simply live with covid, and we believe they have also begun signaling that such a change is underway.
It is hard to pinpoint when a full reopening will take place, but we think it could be as early as in February. We will be continuing to monitor China closely and anticipate publishing a large number of updates. For now, China remains in the midst of its third covid surge, but this one remains different as lockdowns are being lifted even as cases have been rising. For the dry bulk market, it is encouraging that an easing of restrictions has been able to occur at such a time, and we expect that further easing will occur in upcoming weeks and months even if cases increase. Overall, China’s economy and its citizens have been suffering in recent weeks, and the government needs to prioritize stability and the economy more than anything else. The housing market will remain a challenge, however, but we believe the government has no choice but to further inflate that bubble if possible. If the government is in fact able to further stimulate the economy and promote living with covid, then the dry bulk market will benefit. Last week could prove to be the turning point in China, but as always time will tell.