Can China ever record economic growth greater than 6%?
We don’t know, but if I were a betting man I’d say not.
After contracting some 6.8% in the first quarter of this year, estimates vary with respect to what China’s GDP growth will be for 2020 in total. CRU expects between 2-3%, according to a Financial Times article, but analysts polled by the South China Morning Post are quoting between 1.5-2.5%, with some major banks, like UBS, expecting growth at the bottom of that range.
Many view tiny Hong Kong as something of an anathema — a hangover from the days of the British empire, part of China but not part of China, often missing the point that that is exactly its strength (or has been).
After the last crisis, China was instrumental in spurring global growth and helped pull the West and neighboring economies along with it. Through state stimulus, China achieved double-digit growth, far beyond what its underlying economy would have otherwise been capable.
We are not claiming any particular foresight on this, but a recent Reuters article yesterday covers a topic we wrote on last week concerning the disconnect between China’s aluminum smelters, which managed to raise output by 2.4% during the troubled first two months of this year, and the downstream aluminum semi-finished product producers, which all but shut down due to the enforced government lockdown in many parts of the country.
A Reuters poll of Economists reported last week a revised growth forecast for the first quarter, falling to a median of 3.5% this quarter from 6.0% in the fourth quarter of 2019 — optimistically, a full percentage point lower than predicted in their last poll Feb. 14.
Even if your company does not source product directly from China, many companies are still predicting supply chain disruption as the raw materials used by their manufacturing plants — which can be located anywhere in the world — probably originates in China.
The property sector, which accounts for about 40% of China’s steel consumption, is stagnant, a Reuters report states, while other steel-consuming industries are likely to be operating far below full capacity.
A recent article by respected Reuters columnist Andy Home reports on the impact of the coronavirus, COVID-19, on the supply-demand balance in China, the world’s largest consumer and producer of aluminum, and the ramifications steps taken to contain the virus could have for the market.
But despite repeated complaints from the industry and industry bodies like European Aluminium, the European Union has done no more than require a surveillance license system to report and monitor imports of aluminum into the E.U.
In a move many consider overdue, the European Commission has now opened a probe into whether Chinese exporters of aluminum bars, rods, profiles, tubes and pipes sold them in the E.U. below cost, Bloomberg reported Friday.