Towards the end of last year, China surprised the world with an abrupt pivot away from the strict restrictions of its long-espoused “Zero-Covid” policy., including quarantine requirements for inbound visitors. Despite an initial surge in infections, global businesses rushed in, hoping to cash in on the economic recovery.

Sentiments were further boosted by steps to stimulate economic growth and domestic consumption, mapped during and around the annual Central Economic Work Conference. These steps also helped ailing Chinese developers ease their liquidity strains and revive home purchases.

These measures seem to be working. According to the data released by China’s National Bureau of Statistics on April 18, the country’s GDP grew by 4.5% in the first quarter of the fiscal year. This was better than the forecast of 4% and the highest growth since the first quarter of last year.

Six months on, while the country is still open for business, the momentum has visibly slowed. While China’s exports in April grew by 8.5%, the country’s imports declined by 7.9% year-over-year as growth in the service sector softened, and manufacturing contracted again in three months.

With the 50-mark separating growth and contraction, the Caixin/S&P Global services purchasing managers’ index fell to 56.4 in April from 57.8 in the previous month, and the Caixin China general manufacturing purchasing managers’ index fell to 49.5 in April.

China’s top leaders have also taken note. A translated state media readout of the Plitburo meeting said, “At present the positive turn in China’s economy is primarily one of a recovery. Internal drivers still aren’t strong, and demand is still insufficient.”

As a result of this patchy growth, analysts at Morgan Stanley foresee a significant dip in demand and output of Chinese steel that could result in a 28% decline in iron ore prices by the end of 2023.

With markets mirroring this moderation, Citi has pushed back its stock rebound forecasts, and its analysts expect Hang Seng to take until the end of September to reach 24,000.

Moreover, more significant…

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