The latest data on the Chinese economy show that the rebound observed after the reopening of the economy at the end of 2022 does not seem to be as powerful and durable as anticipated by investors. Indeed, the services PMI, published overnight, or the manufacturing PMI, discovered at the start of the week, both show a sharp slowdown in activity, although these remain above the contraction level, for the moment.
Beyond these recent indicators, publications for the month of June showed a sharp decline in imports and exports, as well as a slowdown in retail sales or industrial production. In addition, the sector’s profits have fallen sharply and are now at their lowest since April 2020, during the first confinements linked to covid.
China’s economy could be impacted by tensions with the US and Europe
While the economic slowdown is also visible in its main partners, such as the European Union and the United States, the tensions between these three economic zones could add to the risks of recession or in any case, aggravate the decline already observed there. the activity.
Indeed, the United States announced, at the end of June, that they could put in place a ban on the export of certain electronic chips to China, officially, for fear of seeing them being used in Chinese armaments. This is rather a way of slowing down China’s expansion, especially in the technology sector.
China replied at the start of the week that it was going to put in place, from August 1, restrictions on the export of two metals essential in the manufacture of certain electronic chips, gallium and germanium and on which the country controls the majority of world production.
In addition, China specified this morning that this restriction was only the beginning of the countermeasures it could put in place, in response to the export bans announced by the United States.
The return of the trade war could impact the American economy
As mentioned above, the Chinese economy could be impacted by an increase in trade tensions with the United States, but the world’s leading power could also see certain sectors reduce their earnings prospects, starting with manufacturers of electronic chips such as NVIDIA, Broadcom or AMD.
For the moment, these companies are benefiting from the euphoria which surrounds the sector of artificial intelligence and all the information concerning the tensions between the two first world powers, have no effect on their share price.
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Yet, fundamentally, a ban on exports to China could be really harmful for these companies, which derive an increasingly important part of their growth from the second world economy. In addition, China’s decision on metals could cause them some difficulty in reaching their production level and above all increase manufacturing costs.
2023-07-05 13:44:09
#China #economic #slowdown #tensions #United #States #Europe
