Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Possibly the two most important things to have understood in markets over the last few years

have been how Chinese de-leveraging would impact the global economy and the economic impact of

COVID lockdowns and the eventual reopenings that followed. Right now, a huge change is occurring

in China as the government made an abrupt decision last month to halt the nation's severe

zero-COVID policy. We're now seeing the world's second

largest economy reawaken while simultaneously being hit by a massive wave of COVID infections.

We're also seeing a push from Chinese policymakers to stimulate the economy, which is still

suffering from a bursting real estate bubble.

China additionally announced just this morning plans to relax restrictions on developer borrowing,

dialing back the Three Red Lines policy that burst the nation's real estate bubble.

China's zero COVID policy looked like it

worked back in 2020, when millions of lives were lost in other countries while China appeared

to keep the debt toll significantly lower. But as other countries vaccinated and reopened,

the Chinese zero COVID policy became a huge burden

on Chinese people and the Chinese economy.

Possibly due to the slowing economy or the ballooning cost of running the program, the Chinese

government began easing the COVID testing requirements in late November.

Without the constant testing, the policy stopped working.

Omicron began spreading first in Beijing and then in the rest of the country.

The authorities moved to lock people down once more, but this time residents fiercely

resisted they had had enough after

...