Baoer Zhao Reprinted from: New York Times Chinese website：
As the world is already grappling with the fallout from the war in Ukraine, an energy crisis and painful inflation, growing protests against tight pandemic restrictions in China, the world's second-largest economy, have injected a new wave of energy into the global economy. New uncertainties and instability.
China has been the world's factory and an important engine of global growth for many years, and its turmoil is bound to ripple elsewhere. Analysts warned that more turmoil could further slow down the production and sales of integrated circuits, machine parts, home appliances and other products. It may also encourage U.S. and European companies to diversify their supply chains faster away from China.
Three years after the coronavirus emerged, millions of Chinese are angry over months of strict lockdowns as the Communist Party attempts to curb its spread. Anger turned into widespread protests last week after a fire in an apartment killed 10 people and comments on social media questioned whether the lockdown had prevented people from escaping.
It's unclear whether demonstrations across the country will quickly be stifled or erupt into broader resistance to China's top leader Xi Jinping's iron-fisted rule, but so far the most significant economic damage has come from the lockdowns.
“The biggest economic hit comes from the ‘clearance’ policies,” said Carl Weinberg, chief economist at research firm High Frequency Economics. “I don’t think the protests themselves are going to be a game changer.”
He added: "The world will still look to China for the best and cheapest products produced there."
Asked how the Biden administration was assessing the impact of the latest turmoil on the economy, National Security Council strategic communications coordinator John Kirby said Monday, "We are not seeing any particular impact on supply chains at this time."
However, global markets fell, partly appearing to stem from worries about the economic impact of spreading unrest in China. The S&P 500 ended down 1.5%, while the dollar, often seen as a safe haven during turbulent times, was higher. Oil prices fell sharply at the start of the day before rebounding.
China's vast economic size and abundant resources have made it a key player in world trade. “It’s extremely important to the global economy,” said Kerry Brown, an associate fellow in the Asia-Pacific program at Chatham House, the London-based institute of international affairs. This uncertainty "will have a huge impact on the rest of the world."
China has now become the world's largest oil importer. In 2021, China produced nearly 30% of the world's goods. "In terms of scale and capabilities, China is irreplaceable," Brown said.
Pandemic-related delays and shortages have prompted many industries to reassess supply chain resiliency and consider additional sources of raw materials and workers. Apple recently announced that it expects sales to decline due to the shutdown of factories in China. It is one of several technology companies moving a small portion of production to other countries such as Vietnam or India.
Some companies’ alienation from China began long before the pandemic, dating back to former President Trump’s determination to launch a trade war with China, leading to a spiral of punitive tariffs.
Yet even as business and political leaders hope to reduce their reliance on China, Brown said, "the harsh reality is that it's not going to happen anytime soon, or even at all."
He added: "We should not fool ourselves into thinking we can decouple quickly."
China's scale is attractive to U.S., European and other companies that want not only to produce products quickly and cheaply but also to sell them in large quantities. There is simply no other market like it.
Companies like Tesla, John Deere and Volkswagen are betting their future growth on China, but they may suffer some setbacks, at least in the short term. Volkswagen announced last week that sales in China were stagnant this year, falling 14% below expectations.
The protests have highlighted the political risks of investing in China, but analysts say the latest wave of protests doesn't reveal anything investors don't already know.
Nigel Green, chief executive of financial advisory firm De Vere Group, said: "Many investors will now look ahead and adjust their portfolios for the reopening." He added that they will "seek to take advantage of the country's exports from Opportunities for the economy to transform into a consumer economy.”
Luxury brands continue to bet their future on growth in China.
While the global economy is interconnected, lower energy prices due to China's economic slowdown are one way other countries can benefit. Over the past 20 years, China's economic growth has been the main driver of global oil and hydrocarbon demand.
Energy experts say rising COVID-19 infections and growing skepticism about China easing restrictions on major cities are a major reason why oil prices have fallen over the past three weeks to levels seen before Russia invaded Ukraine in late February.
"China is the single largest factor in global oil demand," said David Goldwin, the Obama administration's top energy diplomat. “China is the wavering demander.”
Fewer oil tankers have been calling Chinese ports in recent weeks as China's economy weakens under the impact of coronavirus lockdowns, forcing major Middle Eastern and Russian oil producers to lower prices. Now, the spreading protests have created another source of uncertainty about future demand.
China's oil demand is expected to average 15.1 million barrels per day in the current quarter, down from 15.8 million barrels a year ago, according to analytics firm Kepler.
As for supply chain disruptions, Neil Shearing, chief economist at research firm Capital Economics, said he thinks China gets too much blame. "Everything revolves around supply shortages," he said, but in China, industrial production has grown during the epidemic. The problem is, global demand is surging even more.
For now, the biggest economic impact will be within China, not the global economy. Industries that rely on face-to-face contact - retail, hospitality and entertainment - will be hardest hit. Metrics measuring people's activity have dropped significantly over the past three days, Schilling said.
He added that more people are now in quarantine than at the height of the Omicron outbreak last winter. He said it was the wave of infections and the government's response, not the protests, that had "the biggest impact on China's economy."
China has been the world's factory and an important engine of global growth for many years, and its turmoil is bound to ripple elsewhere. Analysts warned that more turmoil could further slow down the production and sales of integrated circuits, machine parts, home appliances and other products. It may also encourage U.S. and European companies to diversify their supply chains faster away from China.
Three years after the coronavirus emerged, millions of Chinese are angry over months of strict lockdowns as the Communist Party attempts to curb its spread. Anger turned into widespread protests last week after a fire in an apartment killed 10 people and comments on social media questioned whether the lockdown had prevented people from escaping.
It's unclear whether demonstrations across the country will quickly be stifled or erupt into broader resistance to China's top leader Xi Jinping's iron-fisted rule, but so far the most significant economic damage has come from the lockdowns.
“The biggest economic hit comes from the ‘clearance’ policies,” said Carl Weinberg, chief economist at research firm High Frequency Economics. “I don’t think the protests themselves are going to be a game changer.”
He added: "The world will still look to China for the best and cheapest products produced there."
Asked how the Biden administration was assessing the impact of the latest turmoil on the economy, National Security Council strategic communications coordinator John Kirby said Monday, "We are not seeing any particular impact on supply chains at this time."
However, global markets fell, partly appearing to stem from worries about the economic impact of spreading unrest in China. The S&P 500 ended down 1.5%, while the dollar, often seen as a safe haven during turbulent times, was higher. Oil prices fell sharply at the start of the day before rebounding.
China's vast economic size and abundant resources have made it a key player in world trade. “It’s extremely important to the global economy,” said Kerry Brown, an associate fellow in the Asia-Pacific program at Chatham House, the London-based institute of international affairs. This uncertainty "will have a huge impact on the rest of the world."
China has now become the world's largest oil importer. In 2021, China produced nearly 30% of the world's goods. "In terms of scale and capabilities, China is irreplaceable," Brown said.
Pandemic-related delays and shortages have prompted many industries to reassess supply chain resiliency and consider additional sources of raw materials and workers. Apple recently announced that it expects sales to decline due to the shutdown of factories in China. It is one of several technology companies moving a small portion of production to other countries such as Vietnam or India.
Some companies’ alienation from China began long before the pandemic, dating back to former President Trump’s determination to launch a trade war with China, leading to a spiral of punitive tariffs.
Yet even as business and political leaders hope to reduce their reliance on China, Brown said, "the harsh reality is that it's not going to happen anytime soon, or even at all."
He added: "We should not fool ourselves into thinking we can decouple quickly."
China's scale is attractive to U.S., European and other companies that want not only to produce products quickly and cheaply but also to sell them in large quantities. There is simply no other market like it.
Companies like Tesla, John Deere and Volkswagen are betting their future growth on China, but they may suffer some setbacks, at least in the short term. Volkswagen announced last week that sales in China were stagnant this year, falling 14% below expectations.
The protests have highlighted the political risks of investing in China, but analysts say the latest wave of protests doesn't reveal anything investors don't already know.
Nigel Green, chief executive of financial advisory firm De Vere Group, said: "Many investors will now look ahead and adjust their portfolios for the reopening." He added that they will "seek to take advantage of the country's exports from Opportunities for the economy to transform into a consumer economy.”
Luxury brands continue to bet their future on growth in China.
While the global economy is interconnected, lower energy prices due to China's economic slowdown are one way other countries can benefit. Over the past 20 years, China's economic growth has been the main driver of global oil and hydrocarbon demand.
Energy experts say rising COVID-19 infections and growing skepticism about China easing restrictions on major cities are a major reason why oil prices have fallen over the past three weeks to levels seen before Russia invaded Ukraine in late February.
"China is the single largest factor in global oil demand," said David Goldwin, the Obama administration's top energy diplomat. “China is the wavering demander.”
Fewer oil tankers have been calling Chinese ports in recent weeks as China's economy weakens under the impact of coronavirus lockdowns, forcing major Middle Eastern and Russian oil producers to lower prices. Now, the spreading protests have created another source of uncertainty about future demand.
China's oil demand is expected to average 15.1 million barrels per day in the current quarter, down from 15.8 million barrels a year ago, according to analytics firm Kepler.
As for supply chain disruptions, Neil Shearing, chief economist at research firm Capital Economics, said he thinks China gets too much blame. "Everything revolves around supply shortages," he said, but in China, industrial production has grown during the epidemic. The problem is, global demand is surging even more.
For now, the biggest economic impact will be within China, not the global economy. Industries that rely on face-to-face contact - retail, hospitality and entertainment - will be hardest hit. Metrics measuring people's activity have dropped significantly over the past three days, Schilling said.
He added that more people are now in quarantine than at the height of the Omicron outbreak last winter. He said it was the wave of infections and the government's response, not the protests, that had "the biggest impact on China's economy."
China Democracy Party, CCP Tyranny and Violation of Private Finance Observer
