Chinese economy slowly reaches the equilibrium after Covid-19 flare-ups


Chinese economy and energy sector 2022

China, the world's second largest economy, admitted this week that its economic growth suffered due to Covid-19 flare-ups in major economic hubs like Shanghai.

Analysts long anticipated the impact on the Chinese economy due to strict, prolonged lockdowns that followed the escalation of infections; China's stubborn Zero-Covid-19 policy made the strict measures inevitable despite the obvious economic cost.

The anxieties that loomed over the energy markets, in this context, are understandable. The price of crude oil, however, continues to go upward unabated.

Price of crude oil in 2021-22

China is the second largest oil consumer in the world and its economic activities determine the sentiments in the fuel markets. 

The latest data from the National Bureau of Statistics of China clearly shows that the imports Chinese economy and energy sector 2022and LNG, liquified natural gas, have come down during the subdued economic activities. 

Chinese activities, however, are optimistic about the prospects of reviving the economy to its former glory. In order to expedite the complex process, according to the the Chinese authorities, the latter are making tax concessions and adopting many supportive policies. 

Although there is a decline in imports in the energy sector, coal imports showed an upward trend - a clear sign that China is preparing itself for harsh winter months ahead; it does not want a repeat of what happened during the winter last year.

Since Chinese economy is limping back to normal, the possibility of the price of crude oil coming down remains low; the drop in the US crude oil inventories last week does not work in its favour either. 

The fear of recession, however, can still make a significant impact in the coming months - when the economic growth in the second quarter, Q2, is out; in Q1, there was a significant contraction in some major economies. 

In Europe, meanwhile, the divisions among members are clear about the way they approach in getting Russian oil and gas into the market; in spite of endless haggling,  oil and gas still flow from Russia to the members of the EU.

As the Russian factor casts a long shadow over the energy markets, the concerns over the supply remains high and the cumulative impact on the price of crude oil is blatantly obvious.



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