The economic roast of China
China being cornered right now. (Photo: Reddit)
Making less (money)
Last week, the World Bank published a report with a lovely title that asked, “Is Global Recession Imminent?”
This has been a question in every economist’s mind ever since all we could talk about in The Tea’s economy newsletter was inflation. It’s as constant as my team asking, “So, inflation again?” before I can even pitch my stories for the week.
Why would the World Bank bring up the dreaded R-word? Last August, international manufacturing output continued to nosedive from the previous month. The lack of a sizable count for new orders didn’t do much to reassure manufacturers that the worse ain’t coming.
If you recall, the earlier parts of this year had people spending their money despite the increased prices of goods. The amount of produced items was valued at $16 trillion. This practically made it the best share of world GDP in 20 years. A lot of items were purchased. You can thank the younger ones for most of it too. A fun drinking game: Take a shot every time a courier service zips past you on the street.
The manufacturing business enjoyed a total international output rising by 6.1% for 12 months despite worries of supply issues. However, this positive momentum wouldn’t be sustained as spending habits would move away from items to providers amidst a gradual return to normalcy.
Remember China’s “zero-COVID” policy? The idea that they could contain the deadly virus with an aggressive lockdown quarantine strategy forcing work to be undermanned or completely shut down whatsoever—yup, it continues to bite them in the a*s.
Data from Caixin show that manufacturing outputs from China took a hit in August due to complications with shipping and exports to and from other countries. Given that the port of Shanghai is the biggest in the world, you can only imagine how big a blow scaling down operations would be to the economy.
Sign of the times
As if things weren’t bad enough already (and to rub more salt onto the wound), the European Chamber of Commerce published a warning last Wednesday that said firms were losing confidence in China as an investment destination due to their erratic COVID-19 policy changes.
The paper had comments from 1,800 member companies who gave 967 recommendations to China as to what they need to do to gain trust back. Think: a large-scale roast session.
Chamber president Joerg Wuttke stated in a media briefing that the rest of the world is already committing to globalization while China is stuck trying to wait for something that probably won’t come. “The world lives with herd immunity, and China waits until the world gets rid of Omicron, which is of course unlikely,” he said.
While China’s policies are placed to make sure that the citizens are kept safe (and ideally, alive), it has become an annoying itch that the rest of the world can’t do much to scratch, as the country keeps strict travel and border restrictions in place.
I can’t imagine the global economic implications if European investors stay true to their word about not wanting to play with China anymore. Will other countries follow suit? Is this the sequel to the Russian mass brand exodus?
Until we have answers, I’ll continue to write about the questions we all have.
