Stresses mount in China

<p>Kia ora,</p><p>Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news China's drive for zero Covid is forcing a mounting economic toll, one that will be felt worldwide soon.</p><p>But first, <a href="https://www.newyorkfed.org/newsevents/news/research/2022/20220510" target="_blank"><strong>American household debt rose</strong></a> to a record US$15.8 tln in the first quarter driven almost entirely by a +US$250 bln increase in home loan balances, but the rise was the smallest in a year and new mortgage and car loan originations declined for a third straight quarter. Home loans now account for 71% of all household debt, the highest share in roughly a decade. Total household debt only stands at 66% of annual economic activity (GDP). In New Zealand, that same level is 75%.</p><p>In China, their pandemic lockdown controls are sharply undermining economic activity. One indicator - <a href="http://www.caam.org.cn/index.html" target="_blank"><strong>the sale of cars</strong></a> - is down by more than a third in April, the steepest retreat ever. The overall <a href="https://www.scmp.com/economy/china-economy/article/3177190/coronavirus-economic-toll-chinas-latest-outbreak-10-times" target="_blank"><strong>economic impact</strong></a> of China's pandemic response is massive.</p><p>Others have noted that the economic stresses are showing up in <a href="https://www.bloomberg.com/news/articles/2022-05-10/mixed-messages-from-top-china-leaders-feed-speculation-of-split" target="_blank"><strong>mixed messages</strong></a> from the Beijing leadership - a truly unusual sign of diverging policy tensions at the top.</p><p>The <a href="https://tradingeconomics.com/commodity/iron-ore" target="_blank"><strong>iron ore price</strong></a> took a tumble yesterday on low Chinese demand. Oil prices did too.</p><p>Meanwhile, China is making progress in finding <a h