"Even the Chinese Economy, Once Resilient Amid the Iran War, Now Under Pressure"

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The New York Times (NYT) reported on April 27 (local time) that the Chinese economy, which had been considered relatively resilient, is now showing signs of strain as oil prices have continued to rise for nine consecutive weeks due to the war in Iran. The Chinese economy has been hit by further weakening of already sluggish consumer spending, as well as by a blow to exports, which are a key driver of economic growth.

The NYT explained, “For several weeks, China appeared to be withstanding the fallout from the war, and relatively robust economic indicators through March supported this impression. However, as the war enters its ninth week, cracks are beginning to show,” adding, “The recent signs of mounting tension demonstrate that, despite China’s vast strategic petroleum reserves and massive investments in renewable energy, the country is not immune to the factors putting pressure on the global economy.”

A ship departing from Qingdao Port, Shandong Province, China. Photo by AFP Yonhap News

China has secured strategic oil reserves and large-scale refining facilities, and has maintained continuous investment in renewable energy, leading to an assessment that the impact of the Iran war has been less severe compared to other Asian countries. In addition, Chinese authorities have instructed state-owned oil companies to pass on only half of the oil price increases to consumer prices to prevent the full burden of energy price hikes from affecting consumers.

However, there are increasing reports that signs of stagnation are emerging throughout the Chinese economy. The NYT highlighted automobile sales and production figures as indicators pointing to an economic slowdown. Automobiles are the second-largest household expenditure in China after apartments, and the automotive industry drives demand for steel, glass, and other materials.

According to the China Passenger Car Association, retail automobile sales in China from April 1 to 19 plunged by 26 percent compared to the same period last year. While part of this decline can be attributed to the end of tax incentives for electric vehicles in December last year, gasoline vehicle sales dropped by nearly 40 percent, indicating a sharp overall decrease in sales.

Due to poor automobile sales, production cuts have become inevitable. In the first and second weeks of April, Chinese automobile factories produced 27 percent fewer vehicles compared to the same period last year.

China announced that its annualized economic growth rate for the first quarter of this year was 5.3 percent. However, the NYT pointed out that most of this growth was concentrated in January and February.

Retail sales in March increased by only 1.7 percent year-on-year, indicating a slowdown. This is significantly lower than the 2.8 percent growth rate recorded in January and February.

Industrial profits announced the previous day for March showed an increase of 15.8 percent, but much of this figure was due to one-off gains for chemical and energy companies that had stockpiled oil and gas at low prices before the war, benefiting from the subsequent rise in oil prices.

Alicia Garcia Herrero, Chief Economist for Asia-Pacific at Natixis, stated, “The Chinese economy is slowing down,” and predicted that China may struggle to achieve its economic growth target of more than 4.5 percent this year. China set its growth target at 4.5 to 5 percent at the opening session of the National People’s Congress last month.

This content was produced with the assistance of AI translation services.