The widespread and stringent Covid-19 restrictions have hit the Chinese economy hard causing massive supply chain disruptions. However, as the Asian giant returns to normal, concerns about rising prices and supply chain disruptions are diminishing.
Thus, the situation in Shanghai, the world’s largest port enclave, is closely watched after the two-month lockdown disrupted supply chains in China and around the world. Traffic into the city is picking up, with some logistics experts reporting that activity is returning to around 80% of levels before the Covid-19 lockdowns in Shanghai. Therefore, the road transport situation in Shanghai could return to normal within the next week or two, digital carrier Flexport Inc told the news agency.
For its part, Shanghai’s port operations are also improving. Daily container throughput, a measure of the amount of cargo handled, is about 95% of normal levels, according to local media reports. Additionally, shipping delays have been significantly reduced. The average waiting time in the Shanghai port area for container ships has dropped to 31 hours at the beginning of June, compared to 69 hours at the end of April, although they are still four hours above the average of the last three years, according to data from VesselsValue.
As for China’s trade exchanges with the rest of the world, they grew by 9.6% year-on-year in May after having suffered a slowdown last April, when they advanced by 0.1%. Thus, exports from the second world economy grew at a double-digit rate in May, -a monthly increase of 12.6% and 16.9% compared to the same month of 2021- thus breaking expectations.
The country’s exports grew last month at a double-digit rate
Meanwhile, imports also expanded for the first time in three months – rising 3.1% monthly and 4.1% year-on-year – providing some relief to Chinese policymakers as they try to chart an economic path out of the shock that has shaken world trade. All in all, the country registered a trade surplus of 73,523 million euros last month compared to a forecast of 54,709 million.
“We always thought that China could quickly resolve supply chain disruptions, but this is even better than our optimistic view,” Wei Yao, head of research for Asia Pacific and chief economist at Societe Generale SA, told Bloomberg. “The question going forward is demand: Western consumers continue to switch from goods to services and are increasingly pressured by inflation. External demand will probably weaken from here, which means that the recovery in demand internal will be even more important but challenging given ‘covid zero'”.
For his part, Vice Minister of Commerce Wang Shouwen also assured this week that China will introduce specific measures to boost trade, including helping banks on issues related to currency, shipping costs and tax cuts to the export.
He also noted that China will strengthen port operations to make them more efficient and hold more trade fairs in line with the new measures to ease pressure on foreign trade, according to Reuters.
Economic stimulus at the “right time”
Just a few weeks ago, and with the aim of reviving the economy, the Chinese government resorted to fiscal stimuli, recently announcing plans to increase spending on infrastructure, grant aid to the airline sector or approve tax credits for the middle class, among others. measures.
According to Colin Graham, Chief Multi-Asset Strategist at Robeco, “The tax credits appear to come at the right time in the cycle to revive growth, unlike in the US where the government has pumped money into an already overheated economy.” “Although using already employed stimulus measures suffers from the law of diminishing returns, the package of measures will revive the economy when the lockdowns are lifted.”
Likewise, he considers that China continues to be an investment opportunity, especially since the demand for raw materials is still key to maintaining the country’s status as a factory in the world. “Furthermore, consumers will come out of the doldrums with ‘overdue spending urges,’ which will help domestic-focused Internet and consumer stocks rebound from historically low valuation levels.”
“The economic cycle is largely out of sync, so the reopening in China should be a boost for global growth,” he concludes.