The year 2020, the Lunar Year of the Rat, will be greatly discussed and debated for many years to come. The Covid-19 pandemic has had a tremendous impact on numerous aspects of our daily lives, an impact which we are still feeling today. Due to the fact that the first cases of coronavirus were reported in China, the Asian superpower was constantly in the spotlight during the year.
While having the potential to reduce China’s allure among global investors, The Year of the Rat was actually tremendously successful for Chinese markets and for those who invested in these markets. But what will the next year, The Year of the Ox, bring?
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A look back at the Year of the Rat
According to the Lunar Calendar, the year only starts in early February. However, most of the Year of the Rat took place during 2020, so let’s examine that year. In late 2019 and early 2020, reports began to surface about a new mysterious virus from the coronavirus family discovered in China. As a growing number of cases were reported, it was apparent that this was a very contagious and potentially lethal virus.
By March 2020, the World Health Organization had declared Covid-19 a global pandemic, resulting in a worldwide stock market crash. China was also heavily impacted, and its stock exchanges tumbled along with those of the rest of the world.
However, China was also the first country to take swift action against the pandemic, issuing province-wide quarantine orders and implementing nationwide measures to help contain the disease. And, as quickly as Chinese markets fell, they also recovered. Eventually, the Chinese and Hong Kong markets finished the year much higher than they started, with the China50 Index closing out 2020 with gains of more than 20%.
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In fact, the pandemic and global lockdowns may have actually helped Chinese markets. According to China Securities Depository and Clearing, the number of new investors in Chinese and Hong Kong markets doubled in 2020.
Will the Year of the Ox be the year of the bull?
Looking ahead to the next Lunar year, there are quite a few factors that could impact markets.
Covid-19
China may have got the pandemic under control, but it is still far from over. In the US and Europe, the coronavirus is still very much a threat and despite successful vaccine developments, a worldwide solution seems quite far away. Since China is such an important part of the world economy, a major consumer, importer and exporter, it will no doubt continue to feel the pandemic’s impact, even if it becomes completely Covid-19-free.
Chinese tech
Everyone manufactures technology in China. Over the past few decades, the Chinese government has made a conscious effort to become a world leader in technology development and manufacturing — with tremendous success.
Everything ranging from smartphones to computer chips to 5G technology, fintech and driverless cars is now made in China of the highest quality. There is no doubt that this trend will continue and that China will further establish itself as a tech superpower in the Year of the Ox.
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The Biden presidency
It is no secret that the relationship between the US and China during the Trump administration was tumultuous. Some might even call that an understatement. During the Trump presidency, the US and China exchanged blows, imposing various tariffs on imports and often trying to intentionally create difficulties for each other’s economies.
But that is about to change. While new US President Joe Biden may keep many of the current restrictions and tariffs in place, he is considered much more stable and less emotion-driven than his predecessor. Biden is still America’s leader and will act in its interests, but his personality is much less confrontational and his narrative is one of compromise and harmony — a fact that could bode well for the Chinese market.
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The forward-looking economic momentum seen in China in 2020, the fact that it has overcome the coronavirus crisis, and the reasons listed above are all indications that the Year of the Ox could be bullish. However, markets are always unpredictable, and there is no telling what will be 2021’s equivalent of the coronavirus. As optimistic as some investors are, there is always a chance that this could end up being the Year of the Bear.
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