Supply-chain disruptions in China likely to appear in coming months: Moody's Analytics
Sep 21, 2022
New Delhi [India], September 21 : Volatility in supply-chain disruptions in and around China is "bound to appear" in the coming months as the country will likely maintain its targeted zero-Covid policy through at least the end of this year, said Moody's Analytics.
Also, regional shipping disruptions could be further exacerbated if China's reactions to evolving US-Taiwan relations lead to the kind of military drills that limited shipping through the Taiwan Strait in August, it added.
It is the weakness of China's economy -- especially the exports -- that weighs on the broader Asia-Pacific economy.
"The economy of the Asia-Pacific region is being tested. Export markets are weakening, inflation is rising, and the multiple imbalances holding back China's economy have only just begun to abate with no clear signal yet of the future," the analysis authored by Steven Cochrane, Chief Asia-Pacific Economist with Moody's Analytics said.
Also, the housing market is the other major factor of weakness in China.
"Property developers have yet to find the financing they need to complete their many unfinished projects, and those with mortgages on undelivered housing units continue their payment boycotts. Similarly, cash-strapped local governments and local government finance vehicles are not able to rev up housing or infrastructure construction," it said.
Prices on new housing units continue to fall, and new construction is down by a third over the year.
"Outside of the tier one cities, the market is quite weak," it added.
However, the silver lining is that some glimmer of improvement has come from the acceleration of both retail sales and industrial production in August, indicating a more robust fourth quarter, it said, adding that it is not likely to bring the 2022 GDP growth rate much above 3 per cent this year.
The good part about most of the Asia-Pacific region, including Southeast Asia and India, Moody's Analytics analysis said, is that it is nowhere near the risk of recession being faced in Europe as inflation is below the elevated levels seen in Europe and in the US.
