China’s sudden pivot in Covid policy is unleashing a huge wave of cases across the country, which will cause near-term disruption and necessitate restrictions to ease the strain on healthcare.

Indicators of growth have already turned down, but will fall further over the winter months. As such, a technical recession over Q4 and Q1 is a risk.

China’s position at the very heart of global supply chains may slow, but should not stop the recovery on net. Exports have slowed markedly, new export orders were last this weak in the 2001 US recession, implying demand-supply imbalances for goods are still easing.

China’s re-opening is unlikely to give a big boost to the rest of the world: as the composition of growth shifts towards services – and policy no longer needs to prop up the economy via infrastructure – the import intensity of GDP is likely to fall, muting the typical multiplier.

The return of tourism will not help many economies, but it should still provide a notable boost for Thailand and a modest offset for Malaysia, justifying the recent FX appreciation.

Overall, markets’ ability to look through the near-term disruption and appeal to a rapid transition to endemic living is likely to be tested.