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Dragon Fights An Internal War

Past few quarters there has been a continuous slide for the China economy that has reduced the demand for various essential products that it imports. The major reason for the slowdown has been the strict Covid measures that have been testing the relationship between the government and the citizens. And last week this relationship turned worst when major cities saw citizen protests as lives got impacted by long measures in place due to Covid.

This situation was seen throughout Europe not long ago and it severely impacted the economy and did leave a scar on many. But if such protests at large scale occur in the world’s largest consuming and producing country then it will impact the world as well.

Though it has a positive side to it as the prices of various commodities and logistics reduced to levels not seen in a year or more. But due to protests, many companies like Honda, Volkswagen and others have shit the manufacturing operations. This would bring the estimated slowdown much more quickly and even might deeper than thought.

It also brings importance to the meeting of OPEC+ that is scheduled on 4th December. Though it is not a ministerial but a monitoring meeting there can still be a small probability that the output might be reduced further as expectations of slowdown become stronger.

Any decisions made in the real or financial world in an anticipation of an event whether a recession or China reopening will create more volatility in the medium term. And if history is any guide then consuming nations will be better off having more rather than less of essential commodities as the new year starts soon.


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