Daily Brief: All These Lockdowns Are Taking A Toll On China’s Economy

Daily Brief: All These Lockdowns Are Taking A Toll On China’s Economy

almost 2 years ago3 mins

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Yet more data out on Monday showed the toll China’s lockdowns are taking on its economy.

What does this mean?

China’s efforts to keep Covid at bay have kept major cities like Shanghai locked down for weeks, and an influx of data on Monday confirmed how bad things have become. Retail sales fell around 11% in April from the same time last year – the second-straight month they’ve fallen, and almost double the dropoff analysts were expecting. In fact, only sales of medicine, fuel, and food and drink grew from April 2021. Industrial production was down too, dipping for the first time since March 2020. And since the country’s companies suddenly didn’t need as many workers, the unemployment rate climbed to 6.1% – and unemployment among young people hit a new record.

China unemployment

Why should I care?

The bigger picture: Is China finally reopening?

Some economists now reckon the Chinese economy will grow just 0.5% this quarter, but the more hopeful of them think April’s data will mark the worst of the slump. After all, the government said it’s going to let some companies reopen this week, and aims to be back to business as usual by the middle of June. The country’s central bank also cut mortgage rates for first-time homebuyers over the weekend, and optimists reckon there could be more measures to boost the economy on the way.

China economic indicators

For markets: Investors welcome their prodigal son.

The prospect that things might only be getting better for the country will give investors even more confidence, after having already sent the Chinese stock market up 2% last week. It’s already working wonders on the professionals: analysts at JPMorgan upgraded their ratings on a bunch of Chinese tech companies – including Alibaba and Tencent – on Monday.

Keep reading for our next story...

Saudi Aramco Reported Booming Profits

Aramco image

Saudi Aramco, the world’s biggest oil company, reported booming quarterly profits over the weekend.

What does this mean?

Aramco had a couple of things working in its favor last quarter. For one, the war in Ukraine limited the supply of oil and pushed its price to a 14-year high. And for another, OPEC+ – a group of oil-producing countries and their allies – continued to unwind the production caps it introduced during the pandemic. That helped drive the company’s profit 82% higher than the same time last year to $40 billion – its highest quarterly profit since its arrival on the stock market.

Saudi Aramco profit

Aramco’s not done yet: the company is confident that demand for oil and gas will be strong for decades, even as its international rivals make a decisive shift toward renewables. That might be why it said it’s planning to spend billions on ramping up its oil production, as well as on boosting its natural gas production by 50% by the end of the decade.

Saudi Aramco oil

Why should I care?

For markets: An iPhone won’t pick the kids up from school.

Aramco’s stock is now up over 30% so far this year, while Apple’s has fallen 19% on the back of a tech stock rout. That means it’s now overtaken the tech giant to become the world’s most valuable company for the first time since 2020. That stands to reason: one of the things working heavily in Aramco’s favor – rising prices – is working against Apple, whose little luxuries are the first things to go when it costs a fortune to fill your car.

Saudi Aramco vs Apple

The bigger picture: Saudi Arabia gets a caffeine kick.

The Saudi government – which owns the majority of Aramco’s stock – will be pleased to hear that the company is on track to return $19 billion to its shareholders this quarter. The country is aiming to use some of the extra cash it makes to invest in new exports that will help reduce its reliance on oil. Coffee beans – you’re up.

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