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China's Economy is Looking Better, but it's not in the Clear yet

Tech rally

The slowdown in China's economy is largely a self-inflicted problem. It was caused by President Xi Jinping's clampdown on private enterprise, a campaign against excessive borrowing by real estate developers, and a continuous adhering to zero-Covid policies.

However, there are some indications that the regulatory nightmare for tech companies could be coming to an end. In the last week, The Wall Street Journal reported that Beijing's review of cybersecurity of Didi was about to conclude. This will allow Didi to return to China's app stores almost one year after being fired for data privacy violations.

Didi's shares increased by 24% Monday on Wall Street after the report.

Other reports in the media this week suggested a slowdown in the crackdown. Bloomberg reported Thursday that Chinese regulators had started early stage discussions about a possible revival of Ant Group's IPO. The report was based on people who were familiar with. Reuters reported on Thursday that Ant the owner of the well-known Alipay app, is planning to submit a preliminary prospectus in order to launch the offering in the next month or so.

Jack Ma was about to record a milestone with a planned $37 billion IPO for the Alibaba affiliate in Shanghai and Hong Kong in November 2020. China blocked the Ant deal just a few days before it was scheduled to trade. This was the start of a regulatory offensive that took over the internet sector for the next year.

"Uninvestable" China could make an appearance

Ant Group stated Thursday that it has no plans to launch an IPO. The China Securities Regulatory Commission added that it has not conducted any research work regarding the possibility of an Ant IPO.

Alibaba (BABA) Shares of Alibaba (BABA) have been tossed around in the news, but are still up 18 percent on Wall Street this week.

In Hong Kong, meanwhile, the stock has been rising for five consecutive sessions and is currently up 22% this week , which is the best weekly performance since Alibaba's secondary listing in Hong Kong in the year 2019.

In recent weeks, the Chinese government has offered further relief for the tech sector. Regulators have announced that they would support overseas listings of tech companies.

And on Tuesday, authorities handed out 60 new gaming licenses following a months-long freeze. Tencent (TCEHY), China's largest gaming company, increased its share by more than 6% in the wake of the news.

The Hang Seng Tech Index, which is a measure of 30 of the biggest Chinese tech stocks in Hong Kong is up 10% this week.

Trade increases

China also released strong trade figures for May, following a decline in April. Exports increased 16.9 percent in May, compared to April's 3.9 percent growth.

In the meantime, imports increased for the first time in three months.

"The growth in both imports and exports was due in large part to the reopening of the port of Shanghai the largest port in China in the final week of May," said Iris Pang, chief economist for Greater China at ING Group.

Shanghai was under a strict lockdown since March's end which forced factories to shut and causing significant shipping delays.

Shanghai is finally 'reopening, but the repercussions of lockdown is still lingering

Congestion at the Shanghai port is "back to normal,"" VesselsValue, a shipping data company, said earlier this week. The average waiting time has decreased to 28 hours from 66 in April.

Premier Li Keqiang called on local officials of the government Wednesday to improve transportation and logistics and ensure supply chains are protected. He reiterated his previous calls for China to boost its economic growth and reduce unemployment in the second quarter.

Cabinet members of the country, the State Council, released a new set of 33 stimulative measures last week to boost growth. It included hundreds of millions of dollars of tax cuts and infrastructure investment.

Is enough?

But analysts remain cautious.

The trade data from May does not change "the general consensus that China's trade surplus is going to shrink," as demand for Chinese exports declines due to a slowing global economy, HSBC analysts said on Thursday.

The World Bank warned earlier this week that there is an increasing risks of stagflation in the global economy. It now expects global growth to slump from 5.7 percent in 2021 to 2.9% in 2022, significantly lower than the 4.1% that was anticipated in January. Global inflation, however, is likely remain higher than the target in a number of economies, according to the bank.

Analysts at HSBC stated that Beijing's push for property and infrastructure investment is expected to boost China's imports of commodities and contribute to the country's inflation issues. SERVERS

They said that China's imports of commodities will continue to be expensive due to the high prices of commodities.

After restrictions were lifted, Shanghai neighborhoods go back to lockdown

China's commitment towards tough Covid restrictions is a major risk.

President Xi Jinping said Wednesday that the country must adhere "unswervingly" to its zero-Covid strategy and urged officials to boost the economy, according to state-owned Xinhua News Agency.

As the authorities begin tests in mass after the lifting of Covid restrictions on the majority of Shanghai's 25 million inhabitants, a increasing number of Shanghai areas will be placed under temporary lockdown.

The Beijing authorities in Beijing's biggest Chaoyang district also announced Thursday the closing of all entertainment venues just days after allowing their reopening.

Jeffrey Halley, Oanda senior market analyst, has stated that markets had mistakenly believed that China was only Beijing and Shanghai.

"Covid-zero is going nowhere in China, and nor is the virus. He also said that the possibility of China's economic activity declining and extended restrictions returning is still very high."

This report was contributed by CNN's Beijing bureau in Beijing.