China’s faltering economy has sparked mixed views from an industry forum about how shipping could be affected. The short-term prospect is bleak, according to Eric Robertsen, chief strategist at Standard Chartered. “China’s outlook is extremely cautious at the moment, and that is probably being polite,” he told a Marine Money conference in Singapore. The remarks come as the World Bank forecast GDP in the world’s second-largest economy to just grow 2.8% for 2022, amid disruption from draconian lockdowns and an ailing domestic property market. That is significantly lower than the 5.5% growth target set by Beijing earlier this year and in sharp contrast to a 5.3% GDP expansion estimated by the US-based organization for the rest of the 23 countries in the Asia-Pacific region this year. Mr Robertsen said he expects a recovery in China’s economy to largely benefit shipping, as Beijing returns to infrastructure investment and fiscal stimulus for a way out. “Over the past 10 years, you will have been told that [China’s] economy is changing. It is becoming more consumer-driven, more services driven. The old export model is being de-emphasized,” he said. “Well, guess what? They are changing back again. And that will mean more trade. More shipping.”

James Marshall, chief executive of dry bulker firm Berge Bulk, said the lockdowns in China have put shipping in a difficult macro environment. However, at least in the markets where his company operates, “volumes are reasonably resilient”, while the sharp correction in freight rates since this summer were largely caused by an unwinding of congestion, with the easing of lockdown restrictions elsewhere in the world, he said. Singapore-based Berge Bulk owns and manages a fleet of 80 vessels, most of which are capesize or bigger dry bulkers. Looking back, China’s stimulus policy in the first half of this year appears to have worked. It was led by the accelerated issuance of government bonds dedicated to infrastructure spending. Steel production is rising again, Mr Marshall noted. The latest data from the China Iron and Steel Association shows that the daily crude steel output by major domestic producers stood at 2.1 MMT between September 11-20, up 2.2% from the same period of the past month, or 7.7% year on year. Steel prices in China have also increased gradually, with a slight drawdown in stockpiles. “I think we are seeing some of that sort of infrastructure spend coming through and helping demand,” said Mr Marshall. “We will still see reasonable volumes going into China in the future.”

Rahul Kapoor, global head of commodity analytics and research at S&P Global, expects Beijing’s zero-Covid policy, which has scrambled factories and consumers in China, to remain in place until March 2023 when the National People’s Congress will be conveyed to confirm President Xi Jinping’s third term. Meanwhile, there is no quick fix in sight to the housing market recession, despite government efforts to stabilize the market by easing rules on presales, subsidies, and mortgages. “The key component here is the housing market. It saw a 7% contraction in the second quarter. That is a key driver for shipping. We all know it has always been. That is something which we are essentially worried about,” said Mr Kapoor. China’s exports and imports, another growth engine for the domestic economy as well as global shipping, are also slowing, he pointed out. Export value in US dollar terms increased just over 7% year on year in August. This was way off from July’s level of 18% and lower than analysts’ expectation of nearly 13%. “Next year, we will not be surprised if exports start contracting,” said Mr Kapoor, adding the struggling economy in large consumer countries in the west is likely to strengthen that trend of decline.

He further predicted a long-term deceleration of the Chinese economy to a growth rate largely below 5% over the next decade, amid various headwinds, such as high corporate debt, real estate bubbles and an aging work population. A relatively healthy state on the vessel supply side, backed by owners’ refrained order appetite due to fuel uncertainty and tonnage eaten up by trade deviation for geopolitical reasons, will continue to provide support for freight markets. But the China story should serve as a reminder to the industry that the demand-side disruptions should not be underestimated, he said.