The Chinese economy is looking as gloomy as it was a week ago, and it is still unclear when the country can return to business as usual.
- “China’s services sector had its worst month on record in February as new orders plummeted to their lowest level since the global financial crisis,” Reuters reports, which notes in a separate report that passenger car sales were down 80% in February.
- “Even if the epidemic is controlled by the end of March, it could wipe out up to 5 million jobs,” said one analyst cited by the Wall Street Journal (paywall), while economists at the National University of Singapore project that China’s economy will contract in Q1, and struggle to recover to an annual rate of 4% growth by the end of the year, even in optimistic scenarios.
- “One of China’s largest plastic producers [located in Anhui Province] was forced to shut down production and quarantine and test hundreds of employees after a worker was confirmed to be carrying the coronavirus despite showing no symptoms,” per the SCMP.
Despite the gloom, the People’s Bank of China (PBoC) declined to cut interest rates, instead stating today (in Chinese) that the “current total liquidity of the banking system is at a reasonable and sufficient level.” Earlier, a front-page editorial in the China Securities Journal had recommended rate cuts, the SCMP reports, but instead, PBoC went against the trend set in the United States, Hong Kong, Australia, and Malaysia. The economists at Trivium suggest a reason why:
Lots of folks are pointing out that the Fed cut will bolster stocks, but won’t do much for the economy itself.
That’s exactly the type of trap the PBoC wants to avoid falling into.
The bottom line: Big stimulus is happening everywhere except China.
One stimulus measure that is going forward: cash support for domestic and foreign airlines. Reuters reports: “For every available seat kilometer, Beijing will award 0.0176 yuan ($0.0025) for routes that are shared by multiple carriers and 0.0528 yuan for routes that are only operated by one carrier, the Civil Aviation Administration of China said in a statement on its website.”
We can expect more similar, targeted programs to aid specific industries as China creaks back to normal life.
How far along is the recovery right now?
- “Around 45 percent of China’s small and medium-sized enterprises (SMEs) had resumed work by Monday,” Xinhua reports.
- But at least some companies are “fraudulently boosting electricity consumption and other metrics in order to meet tough new back-to-work targets,” according to Caixin.