Wed, Jun 29, 2022 @ 15:44 GMT
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Research China – Three New Headwinds to Delay Recovery

The Chinese economy has been hit by three new headwinds from covid outbreaks, the Ukraine war and financial stress. We expect this to delay a recovery into H2. We expect more economic stimulus, as China needs to step harder on the gas to lift the economy out of the current slump. The China weakness will add a further drag on the global economy in coming months, not least on Europe.

Freight rates have continued to fall despite the Shanghai lockdowns suggesting the fundamentals are improving and shipping costs will be disinflationary in 2022. Other factors (wage growth, commodities) keep global inflation pressures high.

A recovery in H2 should give upside for Chinese stocks. We also look for USD/CNY to turn higher as the Chinese trade surplus is set to come down.

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Danske Bank
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