Coronavirus: China economy facing uneven recovery, three months after lockdown
- The uneven nature of China’s economic recovery from the coronavirus lockdown was laid bare in separate surveys released on Thursday
- Exporters warned the worst might be ahead, while Beijing looks set to pump money into construction projects to salvage the recovery effort
More than three months after the Chinese economy was shut down to contain the spread of coronavirus, new sentiment surveys released on Thursday offered a snapshot of how uneven the recovery has been.
For exporters, the worst of the downturn remains ahead, the polling suggests, while the great effort to restart the economy has left people in the service sector feeling better than the industrial base.
There was also fresh evidence to suggest that Beijing is turning to its favoured playbook of old to lift the economy, with firms in the construction sector the most buoyant of all.
But in this comprehensive window on the world’s second largest economy, other countries behind China on the virus-containment curve can see that shutting down and starting over again is likely to be a long and frustrating process.
For smaller, privately-owned manufacturers, the picture is even more grim. The Caixin / Markit PMI, also released on Thursday, showed that export orders fell at the greatest rate since the global financial crisis began in 2008.
“The gauge for new export orders dropped back sharply to a level lower than that in February, pointing to a sharp contraction in foreign demand amid the coronavirus pandemic,” said Zhengsheng Zhong, chief economist at CEBM Group about the Caixin survey. “The sharp fall in export orders seriously hindered China’s economic recovery in April.”
Exports accounted for 17 per cent of China’s economy in 2019, and the problems facing that sector were laid bare by the news that the US economy contracted at an annualised rate of 4.8 per cent in the first quarter - the highest rate of contraction since the fourth quarter of 2008, at the start of the global financial crisis - while the European Union economy shrank by 2.7 per cent compared to a year earlier.
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Research firm TS Lombard expects China’s exports to fall by 40 per cent in the second quarter of 2020, while China International Capital Corp (CICC), a leading Chinese investment bank, estimated that that the drop could accelerate to 20 per cent in April from 6.6 per cent in March.
The official non-manufacturing PMI, which the NBS also released on Thursday, rose from 53.2 from 52.3 in March, ahead of forecasts, largely “thanks to the lifting of lockdowns and easing of travel bans”, said Ting Lu, chief China economist at Nomura.
Among non-manufacturing firms, the construction sub-index fared best - further evidence that China will back a building boom to haul the country out of the worst economic crisis in decades.
Activity among larger service sector firms was virtually unchanged in April at a level showing a modest growth pace, with the Caixin/Markit survey of smaller, private sector firms due to be released on Monday.
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Beijing may hope that an infrastructure splurge will help arrest worrying reports which have placed the unofficial unemployment rate at 20 per cent. Expectations of new hiring fell across the board in the three surveys released on Thursday, with smaller, private sector manufacturers expecting a sharp drop off.
“Amid sluggish demand, employment contracted at a steeper rate,” said Zhong at CEBM Group of the Caixin/Markit survey. “The economic shock may be greater than previously thought, and it may take longer for the economy to recover.”
