Coronavirus: China economy set to get worse before better, official warns, as export hit looms
Date: Monday, March 30, 2020
Source: South China Morning Post
- China has reversed some efforts to reopen entertainment venues amid fears of second wave of infections, while exports are set to plunge
- Tens of millions of jobs at risk, with one report saying 18 million jobs in exporting industries could be lost due to overseas demand slump
China’s economic situation could get worse before it gets better, amid a second wave of demand shock that is set to hit both domestic and foreign trade, a Chinese government official has warned.
Addressing a press conference in Beijing on Monday, the day after President Xi Jinping toured businesses in Zhejiang province, vice-minister of industry and information technology Xin Guobin delivered a candid and downbeat assessment of the economy, in a subtle break from recent optimistic rhetoric about economic recovery.
“With the further spread of the international epidemic, China’s foreign trade situation may further deteriorate,” Xin said. “Overseas and domestic demand are both slumping, having a significant impact on some export-oriented companies. These companies might face a struggle to survive.”
The comments come after Xi said that foreign trade andsmall businesses must be at the heart of China’seconomic recovery, after a horrible first two months of the year, in which economic data plunged to all-time lows across the board.
China is braced for a slump in global demand for the products it ships overseas, as the rest of the world now tries to get a handle on the coronavirus outbreak, two months after China placed large swathes of its own economy on lockdown.
Car companies across the US and Europe are closing factories, with workers unable to staff the production lines, in a situation similar to what happened in China in late-January and February.
Xin warned that many car companies in China could see a drop in production due to insufficient demand, with all eyes now on China’s purchasing managers’ index, which will be released on Tuesday and which will offer some insight as to the status of the ongoing recovery in the world’s second largest economy.
China’s exports fell by 17.2 per cent in US dollar terms in the first two months of this year, a figure which is likely to worsen, analysts have said.
In a report last week, chief China economist at Nomura, Lu Ting, estimated that there could be a 30 per cent contraction in exports over the next two quarters, which could lead to 18 million job losses out of a 60 million export-oriented workforce.
This is on top of a virtual standstill in many parts of China’s service sector, which has also put tens of millions of jobs on the line.
Job openings dropped by more than 30 per cent in the January-February period, according to a joint survey by Peking University’s Guanghua School of Management and Zhaopin, one of China’s largest hiring platforms, last week. Lu Hai, a professor at Peking University, said that the heaviest blows were dealt to the cultural, media, entertainment sectors.
After bringing the domestic epidemic under control, China gave the green light earlier this month for over 600 cinemas, thousands of tourism attractions and half the country’s restaurants to reopen.
But in sudden U-turn last Friday, the National Film Bureau ordered all cinemas to shut down again, without explaining why or when they might hope to reopen.
Shanghai municipal authorities also ordered a number of famous tourist attractions to close over the weekend, including the Oriental Pearl Tower and Shanghai Ocean Aquarium.
The provincial government of Sichuan abruptly shut all local bars, karaoke rooms, internet cafes and other entertainment venues, just three days after their reopening.
As of Sunday, the number of confirmed cases in the country had fallen below 3,000, according to the National Health Commission (NHC). But the total number of imported cased rose to 693, the data showed.
“The possibility of a new round of spread caused by imported cases remains high. At present, we must continue to prevent the dual risks of sporadic distribution of domestic cases and transmission of imported cases from abroad,” NHC spokesman Mi Feng said at a press conference on Sunday.