Home Actuality China’s economic slowdown: A Brazilian problem for 2022 and….2023

China’s economic slowdown: A Brazilian problem for 2022 and….2023

Maria Gonçalves

Covid-19, the war in Ukraine, interest rate hikes. Everything is scaring the world, especially countries that are heavily dependent on other economies. And one that is leaving the planet in anticipation is China. There are many who depend on….a lot of this Asian country. One of these is Brazil. PLATFORMA spoke with some experts who outlined the near future.

The brake on China’s economy will affect the rest of the main world countries, namely those whose foreign sales are mainly destined for this Asian country. One of them is Brazil, which, naturally, will not ignore this crisis. More worrying, according to some experts contacted by PLATFORMA, is that the Brazilian economy is expected to be affected not only in 2022, but also next year.

The zero-tolerance strategy against Covid-19 adopted by the Chinese government will slow the economy – forecasts point to a growth of only 4.4 percent, compared to 8.1 in 2021 – of what is the world’s largest economy, for all this, it is not difficult to predict that others will have a bad time. And Brazil is no exception to the rule, especially because at the moment the destination of more than 30% of exports is China, having already dropped about seven points in the first quarter of this year.

“When the world slows down, the risk in relation to markets that are growing, such as Brazil, gets worse. This makes the exchange rate and commercial exchanges more pressured. The issue of zero tolerance in China against Covid-19 is one of the main factors in this slowdown, but then there is still the war in Ukraine and the rise in interest rates by the American Central Bank. This then leads to an economic slowdown not only in Asia, but also in Europe and the United States. In practice, this means that there will be a lower demand for raw materials, which affects Brazil in terms of exports”, Brazilian economist Roberto Padovani began by revealing to PLATAFORMA.

Scary scenario for the Brazilian economy, among others, but it could be even worse in 2023. “For everything that is happening, I don’t see a way for inflation to decrease in the near future, on the contrary. The worst thing is that prices will continue to rise in matters such as fuel, gas, food, public transport, that is, in those products that families need most. This will also cause poverty to increase and our economy to decrease. There will certainly be, if nothing changes, a more pronounced deceleration of the economy from July onwards, making the scenario for 2023 even more complicated”, stressed the expert.

It should be noted that recently, the Bank for International Settlements (BIS), a kind of central bank of central banks, highlighted that the Brazilian economy could be one of the most damaged in the event of a slowdown in the Chinese. The institution calculates that for each percentage point of decline in the growth of China’s economy, Brazil may slow down by 0.7 percentage point. “Many emerging economies are highly exposed to slower Chinese growth, especially emerging Asian countries and some commodity exporters like ours. Still, commodities are a factor of some optimism towards China,” the bank said in a statement.

Slowdown but no recession

It seems clear that economic growth will not exist in Brazil, or in any other country in 2022. But if the scenario of deceleration is a fact, then that of recession does not seem to be close to happening in Brazil.

“Recession will be difficult to be a reality, especially because we have been slowing the economy since last year, little, but it has happened. This will make us feel the effects of this global economic crisis less. We will feel it, but on a smaller scale”, Livio Ribeiro, an economic researcher, told PLATFORMA, later saying that economic strategies will be needed so that the recession scenario is even removed.

“Right now I don’t see a recession, or rather a high recession that could harm growth even more. But for this scenario not to be a reality, measures will be necessary. It is important for the government to start looking at other economies that could be an outlet, or even a future export strategy. We usually say that when there is a problem, we have to find other solutions, so that this problem cannot be an obstacle in the future. We cannot only sell primary products to our main trading partner. We need to sell products with greater added value, more technologically sophisticated, and to a greater number of countries, so as not to depend on the demand of a single economy,” he concluded.

Agricultural commodities, the least affected

Despite the crisis, agricultural trade commodities for China should be the ones that will suffer the least impact and the ones that will help the Brazilian economy the most in 2022. This is at least the expectation of economist Sérgio Vale. “People, even closed at home, will need to feed themselves and as the Chinese government has done everything to avoid food inflation, this will help Brazil, as we export many of these commodities”, pointed out the experts, who even so foresees reductions and difficulties for the Brazilian economy.

“If the Chinese government doesn’t open up a little bit to Covid-19, it will certainly be a problem. Of course, they will continue to need food, raw materials, but the problem will then be shipping to China. If everything gets tighter, the prices of shipments will be more and more expensive, because if they take time to enter the ports, companies will have to raise prices. It will be a very complicated period, of saturation, but you have to be calm, you have to think before doing business, to stop, put in perspective and then think about the way forward. I’m optimistic, because I see solutions. But for them to emerge, countries like China, or the US, have to rethink their economic strategies vis-a-vis the rest of the world”, he predicted.

Expectations in Xi Jinping’s third term

Xi Jinping, Chinese leader, entered 2022 prepared to secure a third term, which is due to take place at a political meeting scheduled for this year. However, his policies against Covid-19 have been considered disappointing not only in China, but around the world. And it is above all because of this, due to the enormous expectations that the world has about a new term of Xi Jinping, that there is still hope for Chinese economic growth and, consequently, for emerging countries, such as Brazil.

“We know that Xi Jinping has been advocating a campaign to boost growth, mainly through the government’s own investment means. They have a totally different economic strategy than the rest of the world. There is always a strong participation of the State in policies that help economic growth, such as making the Chinese Central Bank transfer many millions to the Ministry of Finance, in order to finance expenses, or, for example in this very specific case, to reduce the impacts of the lockdown on consumers. In the year of a possible third term, and with my eyes on you, I believe that this could be a strategy by Xi Jinping. If so, they will again start to see the leader who before the pandemic was seen as an economic driver ”, told our newspaper, economist Pedro Fatiche, who is one of the most optimistic few.

“I wouldn’t be surprised if the current forecasts of low Chinese growth change in the second half of the year and they show up again big from an economic growth point of view. When I say this it is for the reasons I explained earlier. Chinese economic policy is very specific, it is very inward rather than outward. But the truth is that a strong domestic economic policy ends up helping other economies, as in this case the Brazilian one”, he said.

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