Five China-based banks have raised concerns about the future state of the Chinese economy, amid an agitated geopolitical sector and supply chain issues related to pandemic restrictions.
Serving as one of the world’s largest lenders, Industrial and Commercial Bank of China is worried about "shrinking demand, disrupted supply and weakening expectations" in its annual earnings report, Reuters reported. Agricultural Bank of China Ltd noted similar concerns, while the Bank of China (BoC) noted earlier this week that "the global epidemic will continue to recur, the easing policies of developed economies will be withdrawn and geopolitical conflicts will intensify.”
According to Reuters, much of the financial uncertainty derives from the strict implementation from the no-COVID policy in China, which often results in massive lockdowns, solely installed for the purpose of identifying infected residents. Warnings about the impact were issued following profit reports that exceeded expectations.
The disruptions have led to a strained supply chain growth, according to The Wall Street Journal. The most recent city to be completely locked down, Shanghai, has resulted in many factories shutting their doors. Others are continuing production in a "closed loop" environment.
Although Shanghai's international port has remained open so far, the lockdown restrictions are impacting truckers, warehouses and other links in the supply chain, with various transporters continuing to struggle to move products from warehouses to ports. Another complicating factor is that oil prices have driven up the cost of trucking in China by as much as 10%.
China currently houses 28.7% of all global manufacturing output, according to The American Prospect, while the U.S. is responsible for 16.8% of global manufacturing output. The large sum of output has been largely disrupted amid COVID-19 regulations, causing an inflation in the cost of several goods.