Overseas conflict seen creating more uncertainty

By LIU ZHIHUA (China Daily) 13:42, March 01, 2022

Photo taken on Feb 25, 2022 shows an empty street in Kyiv, capital of Ukraine. [Photo/Xinhua]

Tensions between Russia and Ukraine will likely cause more uncertainties amid the already fragile global industrial and supply chains, exerting some pressure on China's economic growth, which is already facing "shrinking demand, supply shocks and weaker expectations", experts said on Monday.

They also stressed that a peaceful development environment is in line with the interests of all economies in the world, although the impact of Russia-Ukraine tensions on the Chinese economy is relatively limited.

"The conflict has further pushed up the already persistently high-level energy and food prices and maritime transportation costs, and more importantly, it has changed people's expectations and confidence in global supply chains, adding uncertainties to world economic recovery," said Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation.

"For China, a country with huge trade volume each year, if the conflict lasts, rises in commodity prices will lead to higher risk of imported inflation, and Chinese enterprises will also have to pay more costs to cope with the impacted overseas infrastructure and global supply chains to trade or invest," Zhou said.

He also warned that if the conflict continues longer than expected or escalates, its stress on global energy and commodity supply chains will probably spill over to other sectors, resulting in less favorable external development conditions for the Chinese economy affected by disruptions of overseas supplies.

According to Tang Yao, an associate professor of economics at Peking University's Guanghua School of Management, Russia-Ukraine tensions will have a limited impact on the Chinese economy, despite Chinese corn and edible oil imports from Ukraine being expected to be affected.

In addition, the Chinese authorities have become increasingly wary of the increasing uncertainties and challenges in the external environment in recent years, and have been consciously reducing reliance on imported energy, iron ore, agricultural goods and other primary products through various efforts, Tang said.

He stressed that soft domestic market demand remains the largest challenge for the Chinese economy in stimulating growth, as investment is expected to come around soon with more infrastructure projects on the way and investment in the manufacturing sector also gaining vigor.

Amid his worries about higher risks of energy and transportation price rises and disruptions to trade with Russia and related areas, Yin Jinshan, general manager of Hubei Kingshan Lighting, believes it is important to promote the internationalization of the renminbi to increase Chinese foreign trade enterprises' risk prevention capabilities.

Zhou, with CAITEC, said China should accelerate the building of the dual-circulation development pattern to enhance domestic market opportunities and unleash new growth potential. The new development pattern takes domestic market as the mainstay while letting domestic and foreign markets reinforce each other.

Bai Wenxi, chief economist at IPG China, advocated for better utilization of tools such as futures and insurance products to help enterprises hedge against external risk.

(Web editor: Zhong Wenxing, Liang Jun)


Related Stories