Via Mizuho:
On a sequential basis, we see renewed pressure on China’s economic activity in 1Q21. Apart from less favourable seasonality during the lunar new year holiday (LNY,11–17Feb), recent mini COVID outbreaks in Jilin (273 local cases YTD), Heilongjiang (429) and Hebei (919), as well as the latest requirement of 14-day quarantine at home for travelling during the LNY, are expected to weigh on consumer sentiment during the traditionally busy season for travelling and retail sales in January and February.
◼ On the external front, we expect Chinese exporters to suffer from a shrinking profit margin, given the stronger RMB, higher raw material prices and soaring shipping prices. China’s raw material prices have seen positive MoM growth for 7 consecutive months, with their latest growth of 2.6% the fastest pace in 4 years. In addition, iron ore and copper prices recently rose to a ten-year and nine-year high (Fig8and9), respectively. Meanwhile, the shortage of shipping containers due to a lack of return trips to China amid the pandemic has pushed the shipping prices of Chinese exports, especially to Europe, to a record high (Fig2).