China checksmate in Brazil in 2022 as it oscillates between Covid zero and encouraging markets

Covid zero policy in China is a headache for investors in Brazil. (Image: Reuters)

THE China is the second largest economy in the world, only for the Brazil it’s much more than that.

It is our biggest trading partner, the major consumer of commodities and basic materials. It turns out that uncertain directions on the other side of the planet can end the hopes of a party on the Brazilian stock exchange.

Unlike what has been observed in the WesternChina did not pursue fiscal policy during the height of the coronavirus pandemic. Covid-19.

While central banks around the world interest rates rise to curb inflation, Beijing has cut lending and reserve requirements, encouraging your economy as you can. experts heard by Money Times see many challenges on the Chinese horizon.

“In terms of monetary policyChina has adopted a loose tone and incentive to consumption. However, the real estate sector of the country operates with great difficulty with the purchasing capacity of the Chinese greatly weakened. All of this adds up to the zero-tolerance approach to Covid,” he explains. Débora Nogueirachief economist at Tenax Capital.

despite the GDP of China to have grown 4.8% in the first quarter of 2022, compared to the rise of only 1% in Brazilby Chinese standards there is a clear sign of economic slowdown.

Not here, not in China

China’s reopening has rekindled appetite for iron ore and other commodities, which could be good news for investors in Brazil (Image: Disclosure)

Nogueira insists on warning the Chinese real estate sector in the final stretch of 2022. The sector is very demanding of basic materials, such as iron ore exported by Brazil, mainly by the mining company OK (VALE3).

It turns out that if the properties remain too expensive for the Chinese to buy, even if Beijing does not raise interest rates, the negative dynamics there could end up contaminating the shares listed here in Brazil.

This became more evident when China closed itself off to the world in recent times to contain outbreaks of Covid-19 in some parts of the country. The first Brazilian actions to feel the thud were the commodity exporters.

In this final stretch of June, the Ibovespa (IBOV) resumed the level of 100 thousand points basically because China eased its people movement measures and implying that the Chinese appetite remains voracious.

O IMF (International Monetary Fund) expects Chinese GDP in 2022 to rise 4.4% and advance 5.1% in 2023, according to the latest report released in April.

Compared to IMF forecasts in January, the international body cut its bets for China by 0.4% this year and by 0.1% in 2023.

Two Capitalisms in China

Xi Jinping
Xi Jinping has to show results in 2022 if he wants to win another term as president of China (Image: Reuters/Florence Lo)

All the growth promises made by China in 2022 not only concern the future of Brazil and the world, but also the Chinese Communist Party itself, currently headed by Xi Jinping.

The Chinese leader needs to show results to secure another term in December after changes to the constitution.

the specialist in International relations and teacher at ESPM, Leonardo Trevisanconsiders that China has two realities to deal with in a complex semester ahead.

“In addition to political and health content, Xi Jinping will have to deal with two thorns before the Chinese system. The choice between infrastructure or startup capitalism. Reviewing its objectives, the communist party must embrace both”, stresses Trevisan.

China aims not only to dominate markets for basic materials, construction and real estate, but also wants to dictate the rules in technological termsand in this it has already positioned itself through the giants Huawei, alibaba (BABA34) and tencent.

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Source: Moneytimes

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