China’s slowing economic recovery sends red flags to the world

China’s economic recovery from the COVID-19 pandemic has slowed, sending a warning to the rest of the world about the sustainability of the recovery.

Last Friday, China’s central bank lowered the level of liquidity most banks must hold in reserve in order to stimulate lending. While the People’s Bank of China (PBOC) said the move was not a new stimulus, the scale of bank reserve requirement reductions came as a surprise.

Thursday’s data is expected to show China’s second-quarter growth slowing to 8%, from a record first-quarter gain of 18.3%, according to an expert survey from Bloomberg.

China’s economy was expected to rebound from highs reached during its initial recovery, but economists say the slowdown came sooner than expected and the domino effect could reach the world.

“There is no doubt that the impact of China’s slowdown on the global economy will be greater than it was five years ago,” said Rob Subaraman, head of global markets research. at Nomura Holdings. Die now, the others will follow soon. “

Undermine brilliant expectations

Group of 20 finance ministers who met in Venice on Saturday expressed concern over threats to the fragile global recovery, saying new coronavirus variables and uneven pace of vaccination could undermine the positive outlook for the world. ‘Mondial economy.

Chinese state media also quoted several analysts on Monday as saying domestic growth would slow in the second half of the year due to the uncertain global recovery.

The slow recovery in China also reinforces the view that factory inflation has probably peaked and that commodity prices could fall further.

“Slower growth in China is expected to lead to short-term pressures to reduce inflation globally, especially on demand for industrial metals and capital goods,” said Wei Yao, chief economist for Asia-Pacific at Societe Generale.

On the Chinese home front, the biggest mystery remains as to why retail sales remain weak even though the virus is still under control. Sales likely slowed further in June, according to Bloomberg Economics, as sentiment was measured by controls to contain the intermittent outbreak of the virus.