At least the air quality has improved.
The shutdowns across China could not have come at a worse time for Xi Jinping, the Chinese Communist Party and the economy.
But when dawn broke on Monday, for the 27 million people in Shanghai and the 19 million in Guangzhou – who have been ordered to harsh shutdowns to curb the nation’s worst COVID-19 outbreak ever The silver was that the air pollution was noticeably improved.
Unfortunately for the 12.5 million people living in Shenzhen who came out of the lockdown almost a month ago, pollution levels were back to their unhealthy ‘normal’.
What about the economy?
Large parts of China’s economy are now at a standstill. And while official statistics released on Monday show that the economy is still growing, economists fear that Beijing’s attempts to conquer the Omicron variant could backfire.
For an already weakened economy, the shutdowns have closed factories and created chaos among logistics operators such as the port of Shanghai – the world’s busiest – becomes a crowded mess.
The country is still suffering from a meltdown in the real estate market, which was largely developed almost 18 months ago by Beijing as it tried to empty a speculative bubble that triggered a wave of defaults among major developers, resulting in a declining home sales and higher borrowing costs for would-be buyers.
It followed hard on the heels of a repression of some of the country’s largest technology companies and entrepreneurs, which was widely perceived as an attempt to subdue the egos of some of China’s richest.
Problems for China’s leaders
On the surface, the official figures do not look so bad.
China’s economy grew 4.8 percent in the first three months of this year compared to the same period a year ago, and slightly changed from the last three months last year.
But most of that growth took place in January and February. March was a disaster in which workers were put on the ground and hundreds of millions of consumers were forced to stay at home, igniting widespread unrest among allegations of food shortages.
According to the National Bureau of Statistics, retail sales fell 3.5 percent in March.
The crisis is already creating headaches in China’s hierarchy.
After setting an annual growth target of around 5.5 percent for the year, the initial reading came very short, even though it missed the most serious impact of the shutdowns.
Last week, Prime Minister Li Keqiang urged local officials to minimize the economic consequences of the shutdowns with “a sense of urgency.”
Trade data pointed to a sharp slowdown, especially in imports, such as commodities, which are crucial to maintaining the country’s production output.
Exports were better than expected, but it seems that many companies have started to break down their stocks.
Beijing rode to the rescue Friday night with an initiative by the Bank of China to help commercial banks increase lending.
But it was a half-hearted bit of horse art. Instead of lowering key interest rates, as was widely expected after Premier Li’s passionate call, it kept interest rates on hold.
It was a move that confused analysts and sent China’s shares down on Monday.
There is now no way to the obvious.
A downturn in China, the world’s second largest economy, will have a serious impact on global growth.
And given our over-reliance on its growth, it throws another basket ball to the Reserve Bank of Australia on future interest rate movements.
Declining growth and runaway inflation. It’s an ominous combination.
A new global order, or an old one?
Has there ever been a more confusing outlook for the global economy?
As the world returns to a division from the Cold War era between East and West, trade relations – created over the last four decades between these blocs – are desperately trying to evolve and reset.
Add to that a pandemic and the disruption of two years of randomly imposed lockdowns that have resulted in a shortage of almost every conceivable marketable item – from bulk raw materials to the smallest computer chips.
Top it off with an invasion triggered by an increasingly independent dictator in the form of Vladimir Putin, whose indignation at the incompetence of his own armed forces now threatens to escalate the confrontation.
The resulting shortage of almost everything from energy to cars – from bare necessities to luxury goods – has caused consumer prices to skyrocket.
So far, central banks have only responded in large numbers to the inflation threat.
They have drastically changed course with plans for rapid interest rate rises and a sudden withdrawal of the stimulus they pumped in during the pandemic.
But there is hardly any mention of the threat to growth, either from higher prices, higher interest rates or a COVID-inspired slowdown in China.
Takes part in the Beijing cure
Shanghai is located at the mouth of the Yangtze River. When it comes to global trade, few cities are as important.
In addition to its seaport, it hosts the world’s third largest air freight center, is home to China’s largest semiconductor industry and houses many of the world’s largest automakers in GM, Tesla and Ford, along with regional headquarters for a number of multinational companies such as Apple.
Its stock exchange is the third largest in the world in terms of market value.
Shutting it down along with other major industrial hubs will seriously undermine growth with a cascading impact on a global economy already plagued by a fiercely volatile political, economic and diplomatic situation.
After committing to zero COVID tolerance, President Xi – who will seek approval for a third term later this year – has shown little appetite for retiring, but a looming recession could change all that.
How he decides to react is someone’s guess.
Despite the diplomatic friction between Canberra and Beijing, the two-way trade between the two nations has hardly changed with Exchanged goods and services for $ 245 billioneven in 2020 through the pandemic.
Until recently, Beijing has solved economic crises by pumping huge amounts of stimulus in and kick-starting the real estate market and infrastructure, all of which require raw materials such as iron ore.
We have been the biggest benefit of these policies. But if Beijing decides to continue to rein in these excesses and cut Australia off from operation, the silver may prove to us to be something more intangible.