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China’s position as a trade partner now shaky

Just as it offered some trade relief to Russia; another Omicron surge confronts the republic

China continued to import Russian coal to supply power for domestic use in spite of the prevailing global sanctions. Unfortunately, the domestic surge in Omicron infections catalysed another lockdown to contain the spreading.

On incredibly thin ice
When a lockdown happens, both import and export are affected. Economists are scaling back their growth forecasts for China to reflect the likely impact of the lockdowns and higher energy prices. The reduced projections came from Reserve Bank of Australia (RBA)’s recent board meeting, which noted the inflation is slanting towards a 10-year high. RBA said, “Members agreed that a key issue for the inflation outlook was if recent price adjustments represented a one-off shift in the level of prices or the beginning of a period of ongoing price increases.”

Beijing imposed several travel restrictions as part of its COVID Zero initiative, so did Shenzhen. Despite its downsides, China effectively avoided infections and casualties by the millions. Many banks and industry observers have pushed the panic button and reduced its forecast for economic growth; deeply aware the republic is more focused on containing the infection.

Morgan Stanley revised its economic growth forecast for China’s Q1 2022 to zero from 0.6 per cent, with the investment bank now tipping the country will miss its annual growth target of about 5.5 per cent. Its Chief Economist, Robin Xing said, “The double lockdowns sent a clear message that Beijing is prioritising COVID containment over the economy, and a recalibration of its COVID strategy will likely be delayed. Higher infrastructure spending and an easing of housing policies can be expected, but the larger issue remains finding a COVID exit strategy.” Morgan Stanley previously reduced its 2022 forecast for economic growth to 5.1 per cent from 5.3 per cent.

That is just for the Omicron wave. Simultaneously, China’s position about the current Russia-Ukraine conflict is closely watched. The inaction has already spooked investors, not to mention if sanctions hit. Will it spell the end the China’s neutrality stance?

Marine Online News Team
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