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Biman Mukherji

The chances are that Asia’s gain will also bring some China pain.
China’s National People Congress (NPC) last week set a modest 5 per cent growth for this year, surprising many who had expected lawmakers to aim for higher growth after strict Covid-19 controls took a toll on the economy.
While some observers say that the soft outlook is based on estimates when China’s reopening was still under way at the end of 2022, the forecast indicates the nation wants to strike a balance and prevent inflation from heating up.
Such an approach is likely to be severely tested in coming months.
Why did Saudi Arabia start an oil price war?
For years, the world’s second-largest economy has been the biggest driver of commodity markets. Prices of many items like iron ore – a critical input for steel – ran up after Beijing scrapped its zero-Covid policy at the end of last year.
But since then metals like copper, aluminium, zinc, as well as iron-ore have moderated this week as the national Congress – the highest organ of state power in China – did not provide the much-anticipated boost to real estate and infrastructure.
The price zigzag, however, belies greater uncertainty looming over the biggest commodity – crude oil – which is grappling with fresh uncertainty since Russia’s war with Ukraine propelled prices to a 15-year-high of US$139 a barrel last spring.
Prices have cooled to a tight range of US$80-85 a barrel, as central banks have clamped down on liquidity and raised rates. China’s reopening has had a modest impact, and along with India, it has scooped up Russian oil at a discount without violating Western sanctions.
However, oil markets appear set for another period of turbulence as China’s air and road travel have roared back. For every 1 per cent increase in GDP, there will be about a 1.2-1.5 per cent in outbound travel, according to Haiyan Song, professor at Hong Kong Polytechnic University.

On the one hand, that is welcome news for Asian nations for whom Chinese visitors have always been the biggest spenders on tourism, but it is also likely to pinch them as a majority are import-dependent for oil and China’s demand is soaking up global supplies.
After a collapse last year, China’s demand is expected to account for about half of the global demand of 2 million barrels per day. Global oil demand will rise by 2.3 per cent – the first upwards revision in months – after China relaxed its Covid curbs, the Organization of the Petroleum Exporting Countries (Opec) said last month.
That comes at a time when Moscow has pledged to cut its production by 500,000 barrels per day from next month. According to ANZ, around 1 million barrels per day of Russian supplies are at risk of tapering off in coming months in the backdrop of geopolitical tensions.
The combination of retreating Russian output and stronger China demand “should pave the way for higher oil prices” in the second half of the year. Lack of investment in oil production through the pandemic means new supplies from Opec producers are unlikely.
Oil’s new map: how India turns Russian crude into the West’s fuel
Traders say oil prices are likely to nudge towards US$100 per barrel over the next few weeks. Energy prices are also expected to heat up as China’s imports of liquefied natural gas are expected to compete with Europe later this year.
China’s manufacturing activity expanded at the fastest pace in more than a decade in February, while new home sales in the same month increased after a 19-month slump – signalling that demand for inputs will only strengthen.
Some resource-rich Asian nations like Indonesia will benefit from the demand, but others like Pakistan that are battling high prices are likely to suffer. Predictions of deficit monsoon rains in the Indian continent this year have also emerged as a worry for crop output.
If you add it all up, supply uncertainties mean Asia is months away from a full recovery.
Biman Mukherji is a senior correspondent at the Post’s Asia desk.


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Asean

Asia set for both gain and pain as reopened China soaks up oil demand

Shanghai Yangshan Deepwater Port Container Cargo Terminal in Shanghai has become one of the world’s largest container port. Oil markets appear set for another period of turbulence as China’s air and road travel have roared back. Photo: Shutterstock

After a collapse last year, China’s demand is expected to account for about half of the global demand of 2 million barrels per day. Photo: Shutterstock

Will Asia’s economy weather the coming storm as dark clouds gather on the horizon?

A container ship is seen docked at the Port of Tanjung Pelepas in Malaysia. Falling exports are constricting in growth in much of Asia. Photo: Bloomberg

Shoppers walk through a market in Kuala Lumpur last summer. Malaysia’s retail sector had a banner year in 2022. Photo: Bloomberg

Tourists take pictures at a Buddhist temple in Bangkok. Thailand’s economy rose by 2.6 percent last year but tourism recovery gains and strong consumer confidence did not counterbalance an export slowdown. Photo: AFP

A garment export factory in Vietnam. Falling exports have reportedly led to rare lay-offs. Photo: Reuters

Chinese travellers shunning tour groups for free and easy trips to Southeast Asia

Chinese tourists at Patuxay Park in Vientiane, Laos. Photo: Xinhua 

Travel insiders in Southeast Asia say they are seeing fewer Chinese tour groups. Photo: Xinhua

Tourists pose for photos in front of the Central Business District (CBD) skyline at Merlion Park in Singapore. Photo: EPA-EFE

Chinese tourists won’t get true Japanese welcome because of ‘serious’ staff shortage

Tourists enjoy a rickshaw ride in Tokyo. Photo: EPA-EFE/File

Citizens of Shizuoka welcome the first foreign-operated cruise ship to dock in Japan after a three-year hiatus due to the coronavirus pandemic. Photo: Kyodo

As Indonesia powers up EV battery dream with Australian lithium, China set to benefit

A worker at a ferronickel production line in North Maluku, Indonesia. Photo: Xinhua

File photo of a lithium mine in Chile. The material is a key component of batteries used in electric cars. Photo: AFP

A worker processes nickel at a smelter on Sulawesi island, Indonesia. Photo: Reuters/File

This Week in Asia

Opinion

Oil markets appear set for another period of turbulence as Russia cuts output and China’s demand grows
Some resource-rich Asian nations like Indonesia will benefit from the demand, but others like Pakistan are likely to suffer, delaying the region’s path towards a full recovery


Oil markets appear set for another period of turbulence as Russia cuts output and China’s demand grows.


Commodities

China-Asean relations

China economy

Coronavirus China

Ukraine war

China energy security

Energy

Russia

Tourism

Organization of the Petroleum Exporting Countries (Opec)

Hong Kong Polytechnic University

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

As I see it