AFTER A STRING of negative news, including lockdowns in major cities, the Evergrande real estate crisis and regulatory crackdowns on tech behemoths, the Chinese government decided to tear down most zero-Covid restrictions, providing a dose of good news to the global community.
The decision came when countries globally were struggling with moribund economic growth, while four-decade high inflation pushed central bankers to hike rates at a pace not seen in a long time. China played a key role in lifting the global economy after the 2008-09 subprime crisis and the global community expects a similar miracle from China yet again.
The Chinese reopening has wide ramifications for the world economy, especially global commodity markets and their ripple effects on India.
CHINA, A MIGHTY FORCE China is a trading Goliath that accounts for 20% of global exports and a 19% share of the global economy. It commands less than 3% of world currency reserves and international payments but the size of the renminbi bloc, a group of countries that use the currency, has nearly doubled to 29% of global GDP from just 15% in 2000. In the same period, the size of dollar currency blocs has declined from 50% of global GDP to 34% today, according to a Morgan Stanley report.
China’s reopening was big news for global commodities as it consumes over 55% of steel, aluminium, copper and zinc. It is also the world’s second-largest oil consumer that gobbles 15% of global crude.
China got a sobriquet of ‘The World’s Factory’ as it accounts for 28.7% of global manufacturing output, much ahead of the next four ranked nations, including the U.S., Japan, Germany, and India, with 16.8%, 7.5%, 5.3% and 3.1% manufacturing output, respectively, in 2019, as per the United Nations Statistics division. China supplies 37% of global clothing and accessories, 53% of furniture, 65% of global footwear and 70% of travel goods and handbags as per MDS Transmodal, a global transport economics firm.
The country, therefore, has the potential to lift the global economy from slowdown purely on the strength of its large manufacturing and consumption base.
Read More at https://www.fortuneindia.com/long-reads/the-china-boost-for-global-commodities/112145
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