Take Two: China relaxes pandemic lockdown restrictions; G7 sets Russia oil price cap
What do you need to know?
China relaxed some of its strictest COVID-19 rules, paving the way for a re-opening of the world’s second-largest economy. Citizens can now travel more freely inside China and quarantine at home rather than in state-run facilities, while whole neighbourhoods or cities will no longer be locked down. The move was viewed partly as a response to protests against the strict controls, despite a record number of daily new cases recently. While the easing of restrictions may boost economic growth, experts warned a jump in new cases could overwhelm the country’s healthcare system. November’s trade report showed deceleration in both export and import growth, indicating modest economic momentum that may be troubling authorities in Beijing.
Around the world
The Eurozone economy expanded by more than expected – at 0.3% in the third quarter (Q3) from a previous estimate of 0.2% – on the back of fixed capital investment and household consumption. Despite suggesting the Eurozone was likely “close to peak inflation”, European Central Bank (ECB) Chief Economist Philip Lane hinted that interest rate hikes would have to continue, albeit at a slower pace. Meanwhile, the Japanese economy shrank less than initially estimated in Q3, by an annualised 0.8%. While still a sharp drop from the 4.5% growth recorded in Q2, the upward revision may offer an early sign of recovery.
Figure in focus: $60
G7 countries set a $60-per-barrel price cap on Russian seaborne crude oil – seen as an attempt to curtail Russian oil revenues. The price limit, which entered into force on 5 December, was lower than the $65-$70 initially proposed, but well above the discounted prices at which countries have purchased Russian crude in recent months. Meanwhile, concerns over recession and weakening fuel demand pushed oil prices to their lowest levels of the year, with Brent Crude futures well below $77 a barrel on Friday morning.
Words of wisdom:
Biocredits: A short name for biodiversity credits and a potential tool in the basket of solutions for addressing degradation of the natural environment. Still in their infancy, biocredits are designed to incentivise the flow of capital towards conservation and restoration projects. Research released to coincide with the COP15 biodiversity conference in Canada found they may be a better option than offsets, which could end up harming the environment. However, they will likely face issues around verification and traceability, as has been the case with similar schemes related to carbon emissions.
What’s coming up
Monetary policy dominates the week ahead. On Wednesday the US Federal Reserve meets to decide on interest rates, and announce its latest economic projections, while the Bank of England and ECB hold their own meetings on Thursday. In terms of economic updates, final estimates for US and UK inflation rates during November are reported on Tuesday and Wednesday respectively. Flash Purchasing Managers’ Indices for the Eurozone, Japan, the UK and US are announced on Friday.