KUALA LUMPUR (Dec 28): The opening up of China, after being cut off from the rest of the world for almost three years due to Covid-19 lockdown, spells both opportunities and risks for the global economy and markets.

While China's reopening has been much talked about as the potential catalyst for economic growth in 2023, a surge in Covid-19 cases in the world's second largest economy has raised concerns over the outlook of the global economy.

This is as the surge occurs at a time when China is preparing to drop inbound quarantine rules and remove caps on international flights to and from the country.

Reuters has reported that China's Zhejiang, a big industrial province near Shanghai, was battling around a million new daily Covid-19 infections, a number expected to double in the days ahead, the provincial government said on Sunday (Dec 25).

As the world welcomes the return of Chinese tourists, which totalled over 160 million in 2019, Malaysia is preparing for a potential rise in cases amid the surge in China, while Japan is already planning to tighten controls for travellers from the country from Friday (Dec 30).

Nonetheless, analysts who spoke to The Edge view China's reopening to be a boon to global economy.

Rakuten Trade head of equity sales Vincent Lau said a spike in Covid-19 cases can be expected as experienced by other countries which reopened their borders previously.

"After being cautious for three years, China would not open up the country if it's not confident," Lau said.

"While there is some news suggesting that the Chinese vaccines are not effective, a greater share of the world population is vaccinated… It will take time for things to normalise. The Chinese government is also taking on cautious steps in opening up its economy by doing it in phases," he said.

Meanwhile, MIDF Research head of research Imran Yassin Md Yusof said the global Covid-19 outbreak that started in early-2020 is unlikely to repeat as the virus has evolved to a "milder version", and the world's population has largely been vaccinated.

While the worry is on China exporting the virus to other countries, Imran pointed out that travel restrictions would probably apply since persons infected with Covid-19 are not allowed to travel.

"Of course the spike in new cases recently is worrying and may delay the reopening. It very much depends on whether China's government will continue with its Zero Covid policy.

"However, early indications suggest that it may have pivoted to managing life with Covid-19, similar to the rest of the world," Imran said. "In fact, many countries have stopped or put less emphasis on the number of infections."

China, where Covid-19 originated from, will reopen its borders to international travellers on Jan 8, 2023. Inbound passengers will only be required to present a negative test result obtained within 48 hours of boarding.

Key Asian markets rose on Tuesday (Dec 27) on the news. Japan's Nikkei 225 gained 0.16% to 26,447.87, South Korea's Kospi rose 0.68% to 2,332.79. In China, the Shanghai Composite jumped 0.98% to close at 3,095.57 and the Shenzhen Component rose 1.16% to 11,106.5.

Elsewhere in Asia, Jakarta Composite gained the most on Tuesday, closing 1.28% higher at 6,923, while Singapore's Straits Times Index jumped 0.27% to 3,266.38 and Thailand Stock Exchange rose 1.01% to 1,634.16.

In Malaysia, FBM KLCI closed slightly higher by 0.01 point at 1,474.69 after lacklustre intraday activities, with declines in banking stocks on profit-taking.

Glove stocks, which took a beating this year, gained amid the surge in China's Covid-19 cases.

Top Glove Corp Bhd rose 10.5 sen or 12.8% to 92.5 sen, Hartalega Holdings Bhd jumped 13 sen or 7.69% to RM1.82, Kossan Rubber Industries Bhd gained two sen or 1.77% to RM1.15, and Supermax Corp Bhd jumped 7.5 sen or 8.98% to 91 sen.

China ended its strict "Zero Covid" control in early December, following a series of protests that started in November.

Cases have exploded in the country with a 1.4 billion population, but its national agency stopped publishing Covid-19 cases from Sunday, which led to World Health Organization emergencies chief Dr Mike Ryan calling for more information about the latest numbers of infections.

"In China, what's been reported is relatively low numbers of cases in ICUs (intensive care units), but anecdotally ICUs are filling up," Ryan was reported as saying.

On Saturday (Dec 24), China's National Health Commission said in a statement that it recorded 397,195 cases with symptoms on Friday (Dec 23), as well as 5,241 deaths. Some 15.38 million people were identified as having had close contact with patients, it said.

Amid the pandemic, the World Bank has slashed its China's economic growth forecast for 2022, compounded by weaknesses in the property sector. It slashed its 2022 gross domestic product growth forecast for China to 2.7%, from 4.3% earlier predicted in June. It also revised its forecast for next year's growth to 4.3%, from 8.1% previously.

Meanwhile, Goldman Sachs last month raised its estimate for China's economic growth to 4.5% for next year, citing the exit from Zero Covid policy. UK-based asset management Schroders plc expected China to grow by 5% in 2023, from 3% in 2022.