Chinese factories are under great pressure by Omicron
Recently, a Chinese official admitted that manufacturing activities in this country are facing difficulties. face great downward pressure. The reason is the global epidemic situation and weak demand.
CNBC reported that Luo Junjie – an official from the Ministry of Industry and Information Technology of China – Production activities at Chinese factories are facing “fairly large” downward pressure in the first quarter of 2022.
According to Mr. Luo, the economy has not yet recovered. rebounded strongly due to the global epidemic situation, weakening trade growth, slumping consumer demand and other factors. “On top of that, outbreaks of Covid-19 are increasing. In the first quarter, the industrial economy still faces quite a lot of downward pressure,” said the official.
Since the end of December, the Beijing government has been introduced strict regulations to control new outbreaks. Morgan Stanley’s economic team has just downgraded China’s GDP growth forecast to 4.5% year-on-year.
The economy of 1.4 billion people is weighed down by the global epidemic situation , trade growth weakened and consumer demand plunged. Photo: Reuters.
Great pressure
“Variation The new, more contagious virus could keep Chinese consumers from going out during the Lunar New Year. This will constrain spending in the service sector,” said a Morgan Stanley report.
China’s retail sales plunged in the fourth quarter of 2021. China’s National Bureau of Statistics also warned of “triple pressure” on growth due to weak demand, supply shock and dim economic outlook.
In recent weeks, scattered outbreaks across the country have forced many Chinese manufacturing plants to close. Shipping activities in Ningbo – one of China’s largest seaports – were disrupted, the operations of computer chip manufacturers in Xi’an stalled.
The economy has not yet recovered strongly due to the global epidemic situation, weakening trade growth, slumping consumer demand and other factors.
Mr. Luo Junjie, an official under the Ministry of Industry and Information Technology of China
Beijing has locked down a number of cities to prevent the epidemic from spreading. Many neighboring cities also face restrictions. The government of Shenzhen – China’s manufacturing and technology hub – tightened restrictions on vehicles entering the city.
Service sectors such as hotels and business activity has yet to recover to pre-pandemic levels. Workers in these industries may have to live on savings and spend more sparingly.
Slowing consumer spending could drag down the Chinese economy. According to Wang Jun, chief economist at Zhongyuan Bank, the main reason why China cannot sustain economic growth is weakening demand. Mr. Wang Jun emphasized the negative impact of the pandemic on workers’ incomes.
To support the economy, China’s central bank continuously lowered interest rates. . On January 20, the People’s Bank of China (PBoC) lowered the prime interest rate for one-year loans from 3.8% to 3.7%. In December, the PBoC lowered the interest rate for the one-year loan for the first time since April 2020.
The base rate for the 5-year loan was also lowered by 5 points from 5. ,64% down to 4.6%. This is the first cut since April 2020 – when the Covid-19 outbreak dealt a heavy blow to the economy.
PBoC stepped in
Lending prime rate (LPR) affects lending rates for domestic household and corporate loans.
Previously, PBoC reduced interest rates on medium-term loans from 2.95% to 2.85%. The agency also injects liquidity into the economy by providing 700 billion NDT (equivalent to 110 billion USD
) medium-term lending instruments, exceeding 500 billion NDT due debt, pour another 100 billion NDT with contracts 7 days reverse repo, overvalued 10 billion USD is due.
According to Capital Economics, Beijing government lowers interest rates to reduce borrowing costs. “This could help boost housing demand,” commented Sheana Yue, an economist at Capital Economics.
“The targeted support for property buyers has can limit one of the serious downside risks facing the economy”, the expert added.
Semiconductor shortage has somewhat improved, but the supply has not been able to fully recover. Photo: Reuters.
However, Mr. Ting Lu – Head of China Economic Group at Nomura – said that the impact of the LPR cuts “will be quite limited”. Because these cuts are quite small to make a significant impact.
According to Mr. Luo, the semiconductor shortage has improved somewhat. However, supply will still be tight for a while.
According to data released earlier this week, China’s semiconductor output has increased by 33% in 2021. compared with a year earlier. In December alone, chip output increased by 1.9% year-on-year to 29.9 billion chip units.
December’s auto output increased by 3.4% year-on-year, marking the first increase since April.
Thao Phuong
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