Resumption loses strength in China, but should save Brazil – 07/17/2023 – Market

It was up to economist Cao Heping, from Peking University, to pass on the idea that the recovery continues in China, with a 6.3% expansion in GDP in the second quarter of 2023, in a year-on-year comparison.

“It is a hard-won feat in the midst of multiple internal and external challenges,” he assessed. “It reflects that Chinese consumer confidence has not been seriously undermined. And that the dual circulation development paradigm [a priorização do consumo interno por Xi Jinping] compensates for the slowdown in external demand.”

It is the official formulation, to defend the result. But financial services like Shanghai’s Yicai and Beijing’s Caixin could not hide that their own surveys, along with China’s chief financial market economists, had both projected 7%.

The positive number at first sight, 6.3%, causes frustration because the basis for comparison is the second quarter of 2022, when growth was minimal (0.4%) due to the restrictions still in force of the Covid zero program. Compared to the more significant first quarter of 2023, the expansion in the second quarter was 0.8%.

Different economists from banks and consultancies, such as China Minsheng, Zheshang and Zhixin, opined that the slowdown in the recovery reflects caution in the industry, the subdued real estate market and a still not solid consumption of services.

For the future, what they expect is more stimulus from the Xi government, including or above all to improve the unemployment situation among young people, which reached a new record, 21.3% in the group up to 24 years old. It is the data with the most explosive potential, politically, in China itself.

The effects that negative results may have on the global economy, including Brazil, are also projected.

Sought after, the Secretary of Foreign Trade, Tatiana Prazeres, points out that in the first half of this year, Brazilian exports to China, in fact, grew 5.9%. She claims that “more essential goods”, such as food, are little influenced by movements in the Chinese economy, such as variations in consumer income.

“Even if China grows at a slower pace, it will continue to demand soybeans, corn and meat from Brazil”, he says. The biggest risk would be for industrial commodities such as iron ore and oil, which could be hit by slower income growth for Chinese consumers.

“However, Brazilian iron ore is extremely competitive and a lower global demand affects revenue by lowering the price and not the volume, since other suppliers that offer worse quality are passed over in relation to the national product”, says Prazeres.

“As for oil, there also seems to be a Chinese preference for Brazilian oil. [gigante chinesa] Sinopec is expected to buy more Brazilian oil at the expense of more expensive oil from Saudi Arabia.”

For its part, the Chinese government does not promise stimulus, but accelerates the messages of confidence, with the central bank guaranteeing that the country will avoid deflation, a recent fear in the financial market, and financial regulators calling international investors for a meeting, Friday he comes.