Daily Brief: How Long Can China Keep Up Its Zero-Covid Schtick?

Daily Brief: How Long Can China Keep Up Its Zero-Covid Schtick?

over 1 year ago3 mins

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Data out on Monday showed that China’s economy struggled to get back on its feet last month.

What does this mean?

The world might be learning to live with Covid, but China’s still refusing to have anything to do with the little rascal. That led to a wave of new restrictions across the country in July, denting both consumer and business spending. Chinese retail sales, then, came in just 2.7% higher in July than the same time last year – a long way short of the 5% uptick analysts were expecting. Industrial production – a key driver of Chinese growth – was disappointing too, up just 3.8%. And with reports of more surges in Covid cases this month, things don’t look like they’re going to sort themselves out anytime soon.

China retail sales

Why should I care?

The bigger picture: What target?

The Chinese government has long been adamant that it would hit this year’s economic growth target of 5.5%, but it looks like it’s finally admitting defeat. Or not admitting anything: it didn’t mention the goal at all in a meeting last month, saying instead that the country would aim to achieve “the best outcome” possible for growth. That might be why its central bank unexpectedly cut a key interest rate on Monday for the first time since January, which it’s hoping will encourage businesses and consumers alike to spend, spend, spend.

China rate cut

For markets: How the tables have turned.

China’s key stock index fell after the news, meaning it’s now down around 3% in the past month. That just goes to show how its pandemic restrictions are setting it apart from other major economies: the US stock market has now climbed four weeks in a row amid signs that inflation is easing up, with the country’s key stock index up 11% this month.

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Aramco Throws Its Massive Weight Around

Aramco image

Saudi Aramco, the world’s biggest oil company, posted the biggest quarterly profit of any public company in the world over the weekend.

What does this mean?

After Shell, Exxon Mobil, and Chevron all reported record quarterly profits at the end of last month, you can bet Aramco wasn’t going to be left out: the company’s net profit crossed the $48 billion mark last quarter – 90% higher than the same time last year. Not only was that a record for the company itself, it was the highest adjusted profit of any public company in the world. Unlike many of its Western rivals though, Aramco chose not to use the cash to up its dividend payouts, instead opting to pay off some of its debt and invest in its production. That’ll go some way to helping it up its oil production capacity from 12 million barrels a day to 13 million by 2027.

Saudi Aramco profit

Why should I care?

The bigger picture: It’s a conspiracy.

Aramco is still expecting demand for oil to keep rising this decade, even warning that there might not be enough to go around when both China and airlines bounce back. That’s partly because its rivals haven’t been investing enough in the industry as they’ve made the shift toward cleaner energy sources. But we’ll need those too: this summer of droughts, wildfires, and floods has either laid bare the need for a move away from fossil fuels, or proved that the Illuminati really is working overtime.

Aramco oil output

Zooming out: If you can beat it, bury it.

Aramco does have some greener ambitions, with plans to become a leading producer of “blue hydrogen”. That would involve producing hydrogen – a gas seen as key to the energy transition – using natural gas, but capturing and storing the carbon emissions. That might be why Aramco said it’s aiming to permanently store carbon dioxide from 2026, creating some of the biggest underground reservoirs of their kind in the world.

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