China missed growth target for first time by some margin

Yahoo Finance Live anchors break down one major theme this week in markets: the China reopening.

Video transcript

AKIKO FUJITA: More than 6 million dead, 13 billion vaccine doses distributed, borders closed, lives changed forever.

RACHELLE AKUFFO: At the beginning of this year, much of the globe was finally emerging from pandemic restrictions. The world's second biggest economy held on zero-COVID was essential, non-negotiable, unflinching, and then the unraveling.

[CHANTING IN CHINESE]

AKIKO FUJITA: Outrage, protests, public anger not seen since Tiananmen Square. Chaotic scenes in major cities like Guangzhou, protesters demanding an end to restrictions.

[SHOUTING IN CHINESE]

RACHELLE AKUFFO: Of course, in November, anger at a boiling point, a backlash against the lockdown at the world's biggest iPhone factory.

AKIKO FUJITA: Then, the final straw-- a deadly fire in a high rise building in the nation's northwest region triggering anger, protesters blaming the deaths on COVID restrictions.

RACHELLE AKUFFO: And now a monumental U-turn, some say the protesters won, others that President Xi chose to save the economy. However you frame it, China is reopening.

AKIKO FUJITA: And it will shake global businesses, money markets, supply chains, and 1.4 billion people within China's borders and the world beyond. We look at what it means for all of us.

[MUSIC PLAYING]

Welcome to Yahoo Finance Live. This is What Just Happened? I'm Akiko Fujita.

RACHELLE AKUFFO: And I'm Rachelle Akuffo, and we're in a deep dive into the biggest story of the week and the ripple effects felt across the world.

AKIKO FUJITA: Almost three years since the start of the pandemic, China's COVID policy has officially changed. And the nation's leaders are faced with the reality that they have missed their economic growth target for the first time by some distance. Just five years ago, Rachelle, that would have been unthinkable. And we are focusing on this topic over the next hour, largely because of the implications here.

Really, the key question is, why is this happening now? And why are we talking about it now? And as we highlighted, it really does, in large part, come down to the economic picture. We're talking about a country that is now looking at a growth rate of about 3%. Some would argue it would be sub 3%.

If you want to get granular, its imports tumbled nearly 11% from a year ago last month. We saw auto sales down 26 and 1/2% in October. These are not good signs. And when you're talking about the world's second largest economy, that's going to have ripple effects globally. And that's kind of what we're trying to focus on over the next hour.

We should point out, by the way, we have already seen that pivot from the government. We saw the Politburo meeting on Wednesday, making it very clear, saying that stabilizing weak economic growth is now the priority, Rachelle.

RACHELLE AKUFFO: I mean, and we really have to wonder, what was the tipping point? A lot of people were wondering, was it the unrest? Because this isn't the first time we've seen unrest in China, but not on this scale, in multiple cities on the same issue at the same time. And as you mentioned, the economic issue as well in terms of what was the tipping point and accelerating this reopening.

We saw that the founder of Foxconn-- that's the biggest iPhone assembler in the world-- he wrote, according to the Washington Post, telling Chinese leaders that zero-COVID would threaten China's central position in the global supply chain. And of course, you remember the chaotic scenes outside of the Apple plant, outside of that Foxconn plant when employees had to stay in lockdown and were protesting this.

And when you think beyond Apple, you've got Samsung, Volkswagen. You have a textiles company that supplies to both Nike and Adidas. And this is coming at a time when the rest of the world is trying to find its feet in terms of global demand and managing inventory. And as China being the world's largest exporter and second largest importer, eight of the top 20 ports in the world based in China. Supply chains need predictability, especially at a time when central banks are trying to grapple with inflation and high prices.

And as we have no idea if and when these lockdowns will arise, as these cases are coming up, this is going to be a real wake up call as we're seeing companies continue to diversify because they just don't know what's going to happen with these case counts, Akiko.

AKIKO FUJITA: Yeah, Rachelle, and, well, we're going to be focused on the economic picture here. This is all likely to come at a cost. I'm looking at case counts on Friday. The government reported more than 16,800 roughly new cases. Now that is officially a decline from the kind of surge we saw last week. But remember, just on Wednesday, we saw the government lift that mandatory testing for all citizens.

So there is a question about just how widespread the virus is right now, whether we can get an accurate case count because of these COVID restrictions loosening. And we did hear from Dr. Anthony Fauci over at the White House this week, raised those concerns, saying that if this goes all undetected, there are concerns about new variants that could come out.

And he really urged the Chinese government to import Western vaccines, mRNA vaccines that have been proven to be a lot more effective at a time when there are concerns about just to what extent the population has immunity because those vaccine rates haven't been as high. And also, they've been vaccinated with domestic vaccines that haven't been as effective. So a lot of questions to raise here both on the economic side, as well as the public health side.

RACHELLE AKUFFO: Indeed.