Rising Covid-19 wave… The economy is struggling with Covid-19 quarantines. Weakness in loan financing – particularly for mortgages – could persist as firms and households pull back amid growing uncertainty surrounding China's worsening Covid-19 outbreaks. Increasing headwinds in the economy will force the central bank to relax more.
Declining mobility, economic impact… The recent lockdowns in Shanghai and other cities have put further downward pressure on growth. On Sunday, China reported more than 26,000 new Covid-19 infections despite the prolonged lockdown of Shanghai, a city of 26 million. After the curfew due to the Covid epidemic, news began to come that there was a food problem and social events increased. Decreased effectiveness in the fight and a useless Chinese vaccine are one of the reasons for the shutdowns in Shanghai after Shenzhen, as well as China's zero Covid policy, and its potential in terms of economic repercussions will mean that growth will also suffer throughout the Chinese economy. Shanghai is the country's economic and financial center…
China's central position in global trade and commodity demand causes a different demand phenomenon pricing to the strategic situation in Russia at the moment. Sometimes the decline in movements in commodities, especially Brent oil, is related to the decrease in China's mobility.
China – US 10-year bond yield spread… Source: Bloomberg
Conclusion? The rising new coronavirus wave in China is putting pressure on growth as the country's aggregate demand conditions and economic activity slow down. Weakening demand from China is also negative for global growth, as authorities continue to pursue a failed zero-covid policy. The China-US bond spread turned in favor of the US after 12 years. We expect the PBOC to increase support. The rate cut will increase market confidence and help lower funding costs.
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Hibya Haber Ajansı
