Oil markets tense as Chinese tech center returns to shutdown
Just two months after the economy reopened, the key areas of China’s technology hub Shenzhen Return to closed stateRestrictions on public activities extended and public transportation was shut down on Friday as cities across China continued to battle the outbreak of the novel coronavirus, COVID-19, which has dampened prospects for an economic recovery.
Authorities in Beijing issued directives that residents in six districts that house the majority of the city’s 18 million residents get tested twice for Covid-19 over the weekend with staff required to work from home.
Employees working in independent “closed circuit” operations, general services and essential supplies are excluded. For example, in the southwestern city of Chengdu, there are factories that include factories run by giants of the automobile industry Toyota And the Volkswagen It kept production running under closed loops. Chengdu’s population of 21 million people Placed under lockdown on Thursday.
oil prices This week was dominated by downward pressure from China’s COVID lockdowns, indicating lower demand ahead.
Back in May, the rise in oil prices came to a sharp halt after Beijing adopted the “Zero-Covid” strategy and announced strict containment measures for Covid-19 including major lockdowns. While strict lockdowns and curfews have slowed the recent Covid-19 outbreak in the country, it has had a negative impact on Chinese consumer demand and manufacturing production.
Unfortunately, the faltering Chinese economy cannot be fixed by simple measures such as lockdowns this time around, with increasing indications that the Chinese economy may enter a prolonged era of sluggish growth.
The world’s second-largest economy is expected to grow just 2% this year, well below the 2.8% increase in US gross domestic product. Maintaining COVID-zero policy has slowed the economy and added huge additional costs to the government’s budget, leaving Beijing with a dilemma over whether to boost debt or tolerate weak economic growth.
Fiscal tensions were already escalating before Covid spending pressures emerged, including lower land sales revenue due to a housing slowdown as well as the tax break for businesses that cut government income. In fact, official data show that the wide-ranging budget deficit reached a record high of nearly 3 trillion yuan ($448 billion) in the first five months of the year.
By Alex Kimani for Oilprice.com
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