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Chinese Protests 2022 : Effect on Global Economy
Reported by – Vishnuja Ranjith
China is facing a great dilemma with the ongoing protests over tough pandemic restrictions.
This dire condition in the world’s second largest economy, will only lead to uncertainty and
instability to the global economy. These protests add to the existing problems that countries
are already in as the aftermath of the war in Ukraine, the energy crisis, and painful inflation.
China has contributed largely to the global development by being the largest exporter of goods
in the world. Analysts warn that further disruptions could further slowdown the production and
sales of products such as integrated circuits, mechanical components and consumer electronics.
It could also encourage the United States and European companies to move away from China
and diversify their supply chains more quickly.
Millions of Chinese citizens have been toiling under a strict lockdown for months as the
Communist Party tries to stem its spread, three years after the Covid-19 virus emerged. The
protests were fuelled after 10 people who died in an apartment fire last week in Urumqi.
Outrage to this incident turned into widespread protests, with comments on social media
questioning whether the lockdown prevented them from escaping. It is still uncertain how the
government plans to respond to the protests, either way, the most prominent cause of this
economic damage can be attributed to the lockdowns.
Companies such as Tesla, Volkswagen, and John Deere have bet on China for their future
growth, but they may face some setbacks, at least in the short term. Volkswagen announced
last week that its sales in China have stalled this year, 14% below expectations. Apple shares
dropped by 2.6% following reports that unrest at one of its factories could lead to the reduced
production of 6 million fewer iPhone Pro units this year.
Energy experts say the growing number of Covid-19 cases and growing suspicion that China
will ease restrictions in major cities are the main reasons why oil prices have fallen over the
past three weeks to recent levels before Russia invaded Ukraine in late February. Oil prices
plunged and hit a low on Monday, while shares of China-dependent manufacturing companies
felt the heat. David Goldwyn, who worked as a senior energy diplomat in the Obama
administration told the New York Times that the Chinese demand is the single most important
driver of global oil demand.