Even if the end of the zero-Covid policy in China initially causes chaos and brings a lot of suffering to the country, in 2023 it will improve many things for German employees, shareholders and car buyers.
When you think of images of overcrowded Chinese hospitals, it’s hard to imagine that the end of China’s zero-Covid policy is some of the best economic news of the year. But it is: Because after almost three years of a tough zero-Covid policy, China’s ruler Xi Jinping declared the once demonized corona virus a harmless flu overnight, sealed off cities with millions of inhabitants, closed factories and idle ports are a thing of the past despite the increasing number of infections.
News Many Have Been Waiting For: Formerly Disrupted Retail Chains That Fueled German Inflation Are Closing; Stores that were previously closed and slowed down sales are filling up with customers. German motorists, investors and employees benefit from this in three ways.
When hundreds of ships backed up in front of the port of Shanghai in the spring of 2022 because the Beijing government shut down the city of millions and with it the country’s most important trading center for months, this also drove up car prices in Germany: Manufacturers were missing components, so they raised the prices, canceled them Discounts and focus on high-priced models with large profit margins. Cars in Germany are currently more expensive than ever.
Example VW: In 2021, the cheapest VW Golf cost just over 20,000 euros. In the meantime, it is worth almost 30,000 euros. This corresponds to an increase of around 50 percent in twelve months. The entry-level model VW Up! – a year ago for almost 15,000 euros the door opener to the Volkswagen world – the Wolfsburg-based company is not currently offering to order; at between Up! and Golf, customers can expect a long delivery time.
Students, commuters and anyone who wants to get from A to B cheaply is currently paying twice as much for an entry-level VW as they did a year ago. Similar price increases can be found with all manufacturers. Since the shortage of new cars also makes used cars more expensive, the increase affects every driver who currently has to go to the dealer.
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The loosened Chinese lockdown policy is now raising hopes that the situation could ease. The Ukraine war will continue to slow down car production because the attacked country supplied many wiring harnesses for cars. Nevertheless, the zero end of Covid should set many supply chains going again: “We expect a volatile supply situation in 2023 as well, but expect a gradual improvement over the course of the year,” confirms a VW spokesman when asked. If more cars come onto the market, this reduces the price pressure on new cars and relieves the market for used vehicles. If smaller models also return, commuters will be cheaper by the end of 2023 than by the end of 2022.
Other products are also likely to either become cheaper or at least not more expensive as a result of the restored supply chains from China. For inflation-plagued Germans, the end of the zero-Covid policy is therefore good news.
The Chinese opening could support the profits of German companies. On the one hand, because more customers are flocking to their stores in the country due to the elimination of lockdowns: Adidas’ China sales, for example, fell by more than a third in the first nine months of 2022. The share price of the sporting goods manufacturer, which was already burdened by the end of the controversial Kanye West partnership and the change at the top of the company, also suffered from this.
If more people flock to Chinese stores in 2023, the world’s most important Adidas market should bring more sales again. If the Chinese economy also recovers from historically low growth due to the zero-Covid policy, Adidas customers can also spend even more money. Two plus points for all Adidas shareholders.
Other companies may benefit from China’s new health policy: During the hard zero-Covid era, for fear of side effects, according to official information, only around two thirds of the over 60-year-old and less than half of the over 80-year-old Chinese had three times against Corona vaccinate. In order to prevent the collapse of the health system, hundreds of millions of unvaccinated people in a country of 1.4 billion people will soon need three doses of the vaccine.
The Mainz-based mNRA pioneer Biontech hopes to be able to supply at least some of these cans: The Beijing leadership, Chancellor Olaf Scholz (SPD), has already promised this for foreigners in China. Biontech probably wants to set up a joint venture with a Chinese company for domestic customers. Either way, the Mainzers should earn well from the deliveries, which pleases their shareholders.
Because the tough Beijing pandemic course did not benefit any German company, the list of companies benefiting from the zero Covid end is now long. Investors can look forward to a better stock market year 2023 without endless lockdowns.
What helps shareholders also benefits employees: All companies that exported their products to China struggled with the burdens of the zero-Covid policy in 2022. According to customs officials in Beijing, Germany’s exports to China fell by almost a fifth in November 2022 compared to the previous year. Economic experts unanimously named the tough corona pace up to its surprising end as one of the greatest dangers for the German economy in the coming year.
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Since the zero end of Covid, the chances have increased that German companies will be spared renewed port congestion in 2023 and will be able to ship their products to China more easily. They are also likely to sell more in the country’s more open stores. Both secure jobs in these companies.
Due to the close links between exporting companies and suppliers, German companies that do not deliver to Asia also benefit from better sales in China. This secures more jobs and the purchasing power of these employees, which in turn serves other companies and their employees.
If German foreign trade with China grows again at the same rate as before the Corona crisis, the Federal Republic will be in a better position at the end of next year than if the zero-Covid policy had further burdened foreign trade.
