China sneezes and the world catches a cold
Thursday, October 21, 2021 310
Prof. Dr. Ahmed Al-Husseini
This is how the situation appears after the Chinese factories entered into a new complex and two-fold crisis.
The first is the shortage of electric energy in China, which was reflected in power plants, especially coal-fired ones, and the relationship between prices closely monitored by the Chinese government, and the record high costs of obtaining coal Which later led to a decrease in the volume of production due to operating losses,
not to mention the drought that hit the whole world due to the drop in water levels, which led to a reduction in the quantities of hydroelectric power production.
As for the second part, it is represented in the strict goals of the Beijing government regarding the quantities of electrical energy consumption (which is the amount of energy actually used per unit of production) as part of the Chinese government’s plan to improve environmental conditions,
but with the boom in demand for Chinese goods, factories pushed to intensify production operations and work overtime, especially in Heavy industries such as aluminum, which led to high rates of electrical energy use and resulted in the failure to achieve the environmental goals it set Beijing.
As a result, Goldman Sachs lowered its forecast for the growth of the Chinese economy and expected growth of 0% in the third quarter, as well as the contraction of the second largest global economy in the final months of 2021.
It is expected that chemical producers will decline between 10-20%,
while it is also expected The decrease in the textiles, paper and plastics industry to 5-10%, and this is not limited to heavy industries only, but the impact may extend to other industries such as charging points for electric cars and solar panel manufacturers, and
Morgan Stanley expected that total steel production will decrease by 9% in the fourth quarter of In 2021 compared to the same period in 2020, while
the aluminum industry will decrease by 7% and the cement industry by 29%, as the chief Chinese economist Craig Bothham predicted (anything related to metals globally will be affected), even if China does not export directly, the price is determined Through the interaction of the forces of supply and demand; So you can't escape from it.
And it seems that the Chinese infection has begun to affect directly and tangibly, as the German Ifo Institute announced that more than 75% of manufacturers in Germany are beginning to suffer from bottlenecks and problems in their basic supply chain, even if it is possible to find new suppliers in different countries, or If China decides to increase production, the shipping industry will falter, making it difficult to get cheap and fast goods.
It seems that the Iraqi economy is not immune to the disease of the Chinese giant, as the volume of imports from China has reached 30.1 billion dollars in 2020, and China is one of the most important trading partners in the list of trading partners for Iraq, as the Central Bureau of Statistics estimated the volume of imports of commodity materials and products from China at 21 billion dollars,
so it is almost definitively expected that the economic crisis that looms in The horizon due to the situation of the Chinese giant will cast a shadow over the fragile and unprotected Iraqi economy, especially if we know that more than 95% of the commodity content in the Iraqi market is imported from abroad.