COVID-19-related lockdowns have dampened demand for consumer goods, including food, in China, while also delaying shipments and thus adding to inflationary pressure internationally, according to a report by French investment bank Natixis.
Sudden production stops in China due to lockdowns have been a major driver of global inflation, it said. While lockdowns have eased, China has reaffirmed its zero-COVID policy will remain in place for the long-term, providing a major risk factor to the global economy, Natixis found.
“Lockdowns at ports and industrial facilities in China and their impact on production of goods as well as supply chain disruptions are clearly the most important risk for global inflation,” the report said.
The rise of the dollar against the Chinese yuan in recent months has ostensibly made Chinese exports more competitive, but the fact that China relies on imported commodities priced in dollars has eroded much of the benefit of a cheaper currency, Natixis found. In contrast, inflation in China has remained under control as consumer confidence has taken a hammering from frequent lockdowns of key cities.
Natixis said due to China lifting its COVID-containment measures, which shut down Shanghai and dozens of other major metropolitan areas earlier this year, China’s stock market rebounded 8 percent in value in June.
“However, Chinese corporat[ions] will still face headwinds from debt-repayment pressure, regulatory uncertainties, geopolitical tensions, and global inflationary pressure,” Natixis said.
Chinese exporters continue to seek higher margins from exports to compensate for weaker price growth at home, Natixis found.
Even with major disruptions at some key ports slowing down the pace of commerce, China’s seafood exports rose 16 percent in value to USD 9.40 billion (EUR 9.02 billion) in the first five months of 2022, according to preliminary data from Chinese customs. The country’s seafood imports surged 29.6 percent in value in that time period to USD 8.36 billion (EUR 7.96 billion).
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