Regional closures are still being implemented in China due to Covid cases. While it is now a very foreign concept to the world, China is still no stranger to lockdowns as it implements a zero-case policy. Therefore, the close sensitivity relationship between Covid and economic activity continues at a high level for the Chinese economy.
Chinese GDP growth and industrial production… Source: Bloomberg
China's activity data reveals that the trajectory of the economy tends to slow down in early 2022. This week, the PBOC is likely to keep the one-year medium-term lending rate unchanged. On the other hand, the rate cuts in 2Q21 and 3Q21 were made to slow down the growth momentum and accelerate the loan market as a precaution. Therefore, although Russia is not in the direct impact of the crisis, even though it may even gain an advantage, concerns over growth stem from the general slowdown in the economy. Factors such as regulation, the real estate sector, and the cramped credit market are the main factors behind China's slowdown dynamics. At the same time, growth is always affected by sanctions and possible economic blows from war. With the economy facing downward pressure and the central bank in a easing cycle, the PBOC will likely continue to cut interest rates from 2Q22 this year.
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