December 6, 2022

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China’s Covid lockdowns for 2022 The risk of inflation is greater than in 2020

China's Covid lockdowns for 2022 The risk of inflation is greater than in 2020

Bernstein analysts found that China’s exports of cars and components more than doubled in 2021 compared to last year, outstripping 30% growth in China’s exports overall.

Yi Fan | China Optical Group | Getty Images

BEIJING – The recent COVID-19 lockdowns in China pose a greater risk to global inflation today than they did in 2020, Bernstein analysts said.

This is because the world has become more dependent on Chinese goods since the pandemic began, analysts said in a note on April 8.

China’s share of exports globally rose to 15.4% in 2021, the highest since at least 2012.

China’s exports have surged in the past two years as the country managed to control the initial Covid outbreak within weeks and resume production, while the rest of the world struggled to contain the virus. China has maintained a zero-Covid policy, while other countries have loosened their controls in the past year.

Over the past several weeks, mainland China has tackled its worst Covid wave in two years with lockdowns and travel restrictions that foreign business leaders have described as more stringent than in early 2020. Stay-at-home orders and virus testing requirements have particularly affected coastal economic hubs such as Shanghai.

“We believe the overall impact of the lockdowns in China could be very high which is something the market has not yet determined,” Bernstein’s Jay Huang and team said in a report.

Compared with pre-pandemic levels, Shanghai’s export container costs are five times higher and air freight rates are two times higher, the report said, noting similar pressures on suppliers’ delivery time. “Then there will be higher export inflation, especially to China’s big trading partners but at the same time delaying the recovery of Chinese demand.”

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Reflecting supply chain disruptions, China electric car company New announce Production stopped Over the weekend, with some production resuming on Thursday. German car industry Volkswagen It said its factories in the suburbs of Shanghai and in the northern province of Jilin remained closed at least until Thursday.

Given that these recent shutdowns come at a point where global supply chains are already strained…we think the impact of this shutdown could be much higher on global inflation and growth prospects than what we saw in 2020.

Bernstein’s analysis found that China makes the majority of overseas demand for containers, ships, rare earths and solar modules – along with the bulk of mobile phones and computers.

The report said that Chinese factories no longer only complete the final assembly of those electronic products, but also manufacture components such as LCD panels and integrated circuits, indicating faster growth in exports of those parts in 2021.

China’s trade data for the first quarter showed steady growth in exports. The country’s Producer Price Index and Consumer Price Index rose faster than expected in March, according to data released on Monday.

China, a rising auto exporter

right Now, TeslaBernstein’s report said BMW and other automakers are increasingly making electric cars in China for export to other countries. Including fuel-powered cars, Chinese state-owned automakers SAIC and Chery are China’s two largest exporters of passenger cars by volume, the report said, citing growing sales of Chinese-made cars to Chile, Egypt and Saudi Arabia.

While the report did not discuss the specific impact of the Covid shutdowns on auto-related supply chains, analysts noted that a number of Korean and Japanese automakers faced production disruptions in 2020 when Covid forced the shutdown of Wuhan.

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In March, passenger car exports rose 14% from a year ago to 107,000 units, with new energy vehicles accounting for 10.7%, according to the China Passenger Car Association. The report pointed to the impact of external uncertainties and a decline in exports to Europe.

China’s auto exports accounted for about Bernstein’s report said 3.7% of overseas car sales in 2021, albeit up from less than 2% in the previous two years.

CNBC’s Michael Bloom contributed to this report.