Why a potential Chinese economic recovery could nudge the US

China could bounce back from the reopening of the pandemic stronger and earlier than expected, offering a rare source of optimism for the US economy amid growing recession fears.

The Chinese economy grew just 3 percent in 2022 and grew 2.9 percent year-on-year in the fourth quarter, according to statistics released by Beijing on Monday. While this is sharply below its 8.1 percent growth in 2021, both the annual and quarterly growth rates beat expectations and raised hopes for a quick recovery in 2023.

China continues to face a number of hurdles as it emerges from the pandemic-driven downturn, including problems in property markets and the country’s continued refusal to approve more effective Western COVID-19 vaccines. The country’s population also shrank last year for the first time since the 1960s, a bad sign for long-term economic growth.

But economists are hopeful that a recovery in the Chinese economy can support demand for American products and relieve pressure on supply chains as Americans face a potential recession this year.

“China’s reopening – uneven or not – is well underway and could be the catalyst for supply chain fixes and increased global demand,” Jeffrey Buchbinder and Thomas Shipp of LPL Research wrote in tuesday analysis.

The end of 2022 was gripped by protests in China due to its strict coronavirus containment policy and a spike in cases following the easing of those restrictions. Both took a toll on the economy as millions of Chinese fell ill and businesses struggled to operate.

“December data was generally surprising but remains weak, especially in demand segments such as retail spending,” said Louise Lu, an economist at Oxford Economics.

“The good news is that there are signs of stabilization now,” she continued.

Lu said that while economic data from China may not catch up for a while, other more timely data tracking pedestrian and vehicle traffic show “signs of a tentative recovery.”

Other experts, such as Goldman Sachs economist Andrew Tilton, expressed optimism that the worst of the renewed COVID-19 surge for the Chinese economy is over.

“Based on news reports as well as related information such as the frequency of Internet searches for virus-related topics, it looks like the peak of daily cases has already passed and there is evidence that mobility is beginning to recover,” Tilton wrote in an analysis earlier. . this month.

“This confirms our belief that economic activity should recover in the coming months. Politicians also seem to be very focused on reviving economic activity in 2023,” he added.

While the US seeks to limit China’s economic influence and dominance over critical commodities, the US economy needs the Chinese economy to avoid another severe downturn.

Walgreens removes restrictions on online purchases of children’s painkillers Greta Thunberg detained during protests at a coal mine in Germany

US businesses and consumers could face another round of price increases and delivery delays if a new surge in COVID-19 disrupts supply chains in China. A weaker Chinese economy could dampen energy demand and lower oil prices, but could still lead to higher inflation if accompanied by factory closures and transport problems.

“Decreased production in China will lead to lower commodity prices, but this could ultimately affect supply chains. And this can push inflation in the West. You know, it’s very hard to say how much these two factors will offset each other,” Federal Reserve Chairman Jerome Powell warned during a December press conference.

“COVID waves around the world could hinder economic activity. China [is] a very important place for production,” he continued.

Content Source

News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News

Related Articles

Back to top button