The annual meeting of the Chinese government, known as the 'Two Sessions', will begin on 10 March. This is the annual meeting of China's two legislative bodies: The National People's Congress (NPC) and the Standing Committee of the National People's Congress (CPPCC). In these meetings, politicians, officials and representatives from various sectors discuss key issues related to the country's development, present and approve plans and laws, and make decisions on social and economic policies. What can we expect this year and what impact might this have on the commodities market?
Withdrawal of the "zero-Covid" policy
Experts predict that China will announce a GDP growth target of around 5%, a sharp increase from last year's 3%. Li Qiang, who is set to become the country's new prime minister, has decided to launch plans to open up the economy earlier than originally planned in order to minimise the economic costs of the zero-COVID policy and respond to public protests. China now appears to have embarked on its version of the US 'New Deal' policy of numerous government interventions to support the economy.
China is now planning to invest in infrastructure, including rail networks, roads, ports and airports to boost economic growth. The authorities have also introduced a series of measures to support small and medium-sized enterprises (SMEs) affected by the pandemic. This support includes, among other things, reductions in borrowing and insurance costs and tax exemptions. The third measure the Chinese government is taking is to continue the process of liberalising its market, including by reducing restrictions on foreign investment and facilitating access to financial markets.
Natural gas market
It seems that the opening up of industry and the intensification of infrastructure spending may lead to an increase in demand for many raw materials. We could see this, among other things, from the PMI industrial business sentiment indicators, which reached above 50 points for the first time since last July. It seems that the Chinese dragon has already started to wake up, as we could already hear reports 2 weeks ago that companies from this country are concluding a record number of new contracts for the supply of liquefied gas. This might change the downward trend of this commodity. In 2021, natural gas imports accounted for 2.6% of total imports for this economy. However, it seems that the share of imports of this commodity may increase in the coming years.
Source: Conotoxia MT5, XNGUSD, Daily
China largest consumer of many raw materials
Crude oil ranks first among China's raw material imports, with 9.6% of all imports in 2021. For this reason, it could be assumed that if domestic demand in the country increases significantly, this could have an impact on global oil prices. However, there is a risk from suppliers, particularly Russia, which is exporting more and more oil to China, including the Urals variety (generally cheaper than WTI or Brent).
Source: Conotoxia MT5, XTIUSD, Daily
Grzegorz Dróżdż, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
