On the 7th of June 2022, the Institute for Foreign Affairs and Trade (IFAT) organised a roundtable discussion on „The impact of the Russia-Ukraine war and the new wave of the coronavirus pandemic on the Chinese economy”. The roundatble discussion was attended by Ferenc Bánhidi, economist and telecommunications expert, associate research fellow at the Research Group for Modern East Asia at Pázmány Péter Catholic University; Csaba Wolf, senior international relations advisor at the Ministry of Finance, vice-president of the Hungarian-Chinese Chamber of Economy; and Zsolt Takács, associated expert to the EU SME Centre Beijing and board member of the Hungarian-Chinese Chamber of Economy. The event was moderated by Dávid Petz, associate research fellow at the Institute for Foreign Affairs and Trade.
The aim of the event was to review the impact on the Chinese economy of the severe lockdown measures imposed because of the omicron variant in the People’s Republic of China, particularly in Shanghai, and the Russian-Ukrainian war, which unfolded almost in parallel.
Zsolt Takács said that Shanghai alone accounts for 5% of China’s GDP, so the impact of the closure of the city for several months will certainly be reflected in the year-end statistics. Experts agreed that China will not reach the 5.5% GDP growth target for this year, but the second half of the year could still bring a strong “bounce back”, as was the case in 2020. On this basis, growth is likely to be in the 4-5% range.
China’s zero-covid policy, which has been in place for more than two years, has already set back production and goods shipments several times. Based on surveys carried out by various chambers of commerce, some foreign companies are considering relocating their production from China. However, Csaba Wolf does not expect a significant shift, and believes that China will remain attractive for foreign companies. The reasons for this are not only the country’s favourable production factors, but also its huge domestic market and its growing purchasing power and middle class.
Ferenc Bánhidi presented the development and state of the digital economy in China. The shares of major Chinese tech companies soared, then plummeted in 2020, but this was due to the introduction of new government regulation, not as a result of the epidemic. These companies have previously made huge profits and have substantial reserves, so they can weather the downturn.
Regarding the logistical difficulties caused by the war, Zsolt Takács explained that the rail link between Europe and China via Russia, which has been ramped up during the epidemic, is no longer an attractive route for freight transport, especially for high-value goods. Ferenc Bánhidi drew attention to the globally dominant Chinese drone manufacturer DJI, which has suspended sales in both Russia and Ukraine. Csaba Wolf reported on the suspension and review of the Asian Infrastructure Investment Bank’s operations in Russia.
Despite these difficulties, Chinese exports and imports have continued to grow so far this year, including trade with Russia. China is taking a middle-ground, neutral position in the war, which is the most advantageous position for the Chinese economy in the current global political and economic situation.
Photos by: Institute for Foreign Affairs and Trade