China’s geopolitical balance

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As such, ANZ Research expects China’s trade surplus to narrow to $238 billion or 1.2% of gross domestic product (GDP) in 2022, or 35.2% of the historical level. high of $676 billion in 2021. As a result, ANZ Research has revised down our forecast for China’s current account to 0.7% of GDP in 2022, from 1.4% previously.

“The crisis could pose downside risks to China’s trade balance.”

With increasing short-term external risks, China may release some strategic oil reserves to ease pressure from rising energy prices. The government has also offered to cut taxes to reduce cost pressures for local manufacturers.

Commodity inflation

The Russian-Ukrainian conflict has led to a global spike in commodity prices. Commodity analysts at ANZ Research have revised the forecast for Brent crude oil futures up to $125 a barrel in the first quarter and $130 a barrel in the second quarter. This represents an increase in oil prices of 52.7% year-on-year, compared to a growth of 63.4% last year. The raw materials recovery was the main reason for China’s overall import growth in 2021.

Chinese imports are closely correlated to world oil prices. According to calculations by ANZ Research, every 1 percentage point change in Brent oil prices is associated with a 0.25 percentage point change in Chinese import growth. Around 60% of China’s total import growth (around 30%) in 2021 was due to price effects. ANZ Research estimates that price effects could contribute 12 to 15 percentage points to Chinese import growth in 2022. As a result, ANZ Research expects Chinese imports to grow by two-fold. figures this year (22.6% year-on-year). Although this figure is lower than the 30% growth recorded in 2021, it is still the second highest import growth recorded in the last decade.

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