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Global markets around the world are expected to plummet as protests in China continue. The protests are due in part to China’s strict zero-Covid policy and citizens' disapproval of such rules. This has been one of the first major government challenges since the Tiananmen crisis more than 30 years ago. China has seen a high number of positive Covid-19 cases, and on Saturday, the nation saw a new high of 40,000 cases. China is the second leading consumer of oil in the world, yet with the intense Covid-19 restrictions, the country is seeing a dip in the amount of production. The nation’s high-risk districts make up close to 65% of China’s gross national domestic product. The country has seen protests for three days and there is no sign of them slowing down.
The strikes taking place in the nation are causing many issues with the production and distribution of oil. Because of the strike along with the government policies, crude oil prices are beginning to fall. Supply chains throughout the nation were not prepared for a halt of this magnitude and it is predicted to begin affecting other countries. The United States' oil prices have also dropped to their lowest point since December 2021. All around the world, global oil prices have fallen about 35% since June because of the strict Covid-19 restrictions in China that are weakening demand.
The offshore Chinese yuan is decreasing in value in relation to the U.S. dollar. As of this past Sunday, the currency depreciated by 0.8% against the U.S. dollar, putting it at 7.2529 in Asia’s morning trade. With China leading the world as the largest crude oil importer, this is causing significant complications. The widespread protests and lockdowns in the country are already reducing oil consumption, and stock prices are falling as concern over the nation’s current state continuously increases. One notable fall was the Hang Seng Index in Hong Kong; this stock decreased by 1.63% in the final hour of trade. On top of this, there were decreases in the Hang Sang Tech, Shanghai Composite, and Shenzhen Component by 2.07%, 0.75%, and 0.69% respectively.
Around the globe, investors are reacting quickly to the situation in China. Europe's market was down at its opening and the U.S. is predicting a similar drop in the near future. One of the notable companies to watch during this volatile period in China is Apple. The company has seen a decrease of 2% as fear begins to strike regarding the production of the iPhone in China. Crude prices have also fallen to an 11-month prewar low. Companies that have the most invested in China are facing harsher results amidst the protesting; however, this is a normal occurrence when it comes to situations like China’s. When there is uncertainty in the market, it causes panic and a frenzy leading to a ripple effect like the one we are currently witnessing across markets.
With the rampant increase in Covid-19 cases, the zero-Covid policies look as if they are here to stay. Across the globe, oil prices continue to fall to lower percentages. Until Covid-19 restrictions begin to lessen in China and protests are resolved, the market is likely to remain this way. Over time, the market may begin to rebound, but China must overcome this conflict to progress toward a stable economic and social community.
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