China’s economic dynamics

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China’s worst coronavirus outbreak since last year has heightened concerns about the country’s economic slowdown as Beijing is eager to contain the increase in cases related to the highly spreading delta mutation.

The National Health Commission reported 94 cases of locally transmitted symptomatic infections on Monday.This Propagation of Delta variants It triggered a dramatic response from the authorities, including large-scale testing and travel restrictions.

After a series of recent data and policy measures have shown that China’s rapid recovery from the pandemic is under pressure, the epidemic is another challenge facing Beijing.

Official data released on Monday showed that despite the government’s efforts to curb the impact of rising commodities that push up corporate costs, factory door prices rose 9% year-on-year in July.

Data released on Saturday showed that US dollar-denominated Chinese exports grew 19% year-on-year in July, which was lower than expected and well below the 32% increase in June.

The factory gate data was released after the People’s Bank of China decided to reduce bank deposit reserve ratios last month, indicating that monetary policy needs to be loosened to support the economy after credit conditions are tightened.

China’s The economy grew by 7.9% year-on-year In the second quarter, it was driven by the country’s low base for fighting the pandemic in 2020 and a 1.3% quarter-on-quarter growth.

Goldman Sachs lowered its forecast for real GDP growth in the third quarter from the previous 5.8% to 2.3%.

Analysts said: “As the virus spread to many provinces and local governments in China, and quickly responded to control the spread of the highly contagious Delta virus, we began to see the weakness of the national comprehensive data.”

Zhang Zhiwei, chief economist at Pinpoint Asset Management, said that inflation data puts “policymakers in trouble” because “inflation is rising and growth is slowing.” He added that China’s review of cross-border travel and trade may put further pressure on the supply chain.

Earlier this year, activities took a hit after an infection in Guangdong Province, the manufacturing center, led to severe lockdown measures.

Ken Cheung, chief Asian foreign exchange strategist at Mizuho Bank in Japan, said that the global spread of the Delta variable “may weaken global demand”, which will affect China’s exports.

Goldman Sachs expects a rebound at the end of the year. Analysts said: “Our forecast assumes that the government will control the virus outbreak within about a month, and the virus outbreak and related control measures mainly hit service activities.”

The rapid spread of the coronavirus in recent weeks has become the biggest test of China’s strategy to eradicate the virus.

Over the weekend, at least 15 CCP officials from Nanjing, the capital of Jiangsu Province, were disciplined by the CCP’s anti-corruption monitoring agency for failing to prevent the outbreak that broke out at the city’s main airport last month.

Ma Xiaowei, director of the National Health Commission, urged officials in a speech on Sunday to “put epidemic prevention work first”, adding that they must “overcome mental paralysis” when fighting the virus.