According to the International Energy Agency, “the preeminent driver of [global] 2023 GDP and oil demand growth will be the timing and pace of China’s post-lockdown recovery.”6 The lifting of activity restrictions, coupled with supportive monetary, fiscal, and regulatory policy, creates a potential opportunity for positive real GDP growth above 6% in the world’s second-largest economy in 2023, a significant jump from 3% in 2022.7 BlackRock Fundamental Equities portfolio managers believe China’s longer-term growth could be slower than before the pandemic, largely owing to heightened geopolitical risks and falling demand for Chinese exports, But, we saw the MSCI China Index return 19% from October 2022 to March 20238 – and we think this rally not only has room to run but could ignite a broader rally in ex-U.S. equities. Chinese oil consumption is also rising sharply in response to reopening (see chart below on Chinese Oil Demand).9
Prior to the pandemic, China was the world’s third-largest consumer of liquified natural gas, second-largest oil-consumer, and largest electricity user.10 As China reopens and demand rises, EM exporters with strong ties to China are likely to benefit.
Oil demand rising as China reopens
Barrels of oil per day (millions)