Beijing: China’s factory production and retail sales remained sluggish in May, with sluggish demand and prolonged COVID regulations slowing economic growth, the second largest in the world, according to official data. The government continues its Zero-COVID strategy to eliminate clusters when they emerge, but this has left businesses and consumers at the mercy of financially damaging blockades.
According to the National Statistics Bureau (NBS), retail sales fell 6.7% year-on-year in May, an improvement over the 11.1% decline in April. This figure was also slightly better than the analysts’ predictions investigated by Bloomberg. “In May, our economy gradually overcame the negative effects of the pandemic,” NBS spokesman Fu Linghui told reporters.
“But we also need to make sure that the international environment is becoming more complex and harsh, and that the domestic economic recovery still faces many challenges and challenges.” Official data show retail sales for the third straight month. Shrinking in, suggesting that nervous consumers are tightening their purses as the threat of blockage continues.
However, while industrial production fell 2.9% in April and then rose 0.7%, the unemployment rate in cities fell to 5.9%. Shanghai, China’s most populous city, has boosted its economic situation by breaking out of a two-month strict blockade in June. “The worst blockade is probably behind us,” speculated Tommy Wu, head of Chinese economist at Oxford Economics. However, while China’s Zero-COVID policy is in place, “it is difficult for household consumption to recover significantly,” he added.
Meanwhile, according to Zhiwei Zhang of Pinpoint Asset Management, millions of students graduate in the summer, raising concerns about unemployment trends. According to the data, the unemployment rate of migrant workers in rural areas continues to rise, but home sales in the first five months fell by 34.5%. Observers remain cautious, despite recent tweaks, as the real estate sector is sluggish and the government is reluctant to move away from the Zero-COVID policy. “There is no guarantee that a new wave will not hit in the coming months,” Nomura’s analyst said Wednesday.
Shanghai blockade
Meanwhile, Shanghai’s long-term blockade of COVID-19 has led to a quarter of US companies in the city cutting investment plans and almost all lowering earnings forecasts. The understated findings of the American Chamber of Commerce (AmCham) Shanghai survey were the latest signs of the impact of anti-virus measures in China. It is the only major economy pursuing a zero-corona strategy, using blockades and mass inspections to eliminate all outbreaks.
However, such measures closed the largest city in Shanghai for about two months, shorting truck drivers with supplies in the port, and closing the company. More than 90% of US companies in big cities surveyed by AmCham Shanghai have cut their earnings forecasts this year, the group said in a report Wednesday.
A survey of 133 companies also found that they expect revenue to be more than 20% less than expected in the quarter. According to AmCham Shanghai, nearly 25% of the companies surveyed have reduced their investment plans. A commercial hub of 25 million people was closed in the section from late March when the Omicron variant contributed to the worst COVID outbreak in China in two years. Signs of resentment and anger appeared during the blockade, and some residents struggled to receive fresh produce and access to non-covid medical care.
Authorities have created a “whitelist” of companies that can continue to produce, but this generally has restrictions to minimize the spread of the virus, and many SMEs have continued to work on the restrictions. About a quarter of the manufacturers surveyed said they are accelerating the localization of China’s supply chain while shifting global product production abroad, AmCham said. As of early June, only 35% of the manufacturers surveyed were in full operation, and nearly three-quarters of all surveyed companies had not yet enjoyed financial support since the blockade of Shanghai. did.
Eric Zheng, president of AmCham Shanghai, said the blockade’s business impact was “serious.” “The Shanghai government must act swiftly to ensure unimpeded supply chains, logistics, worker mobility and accelerate the provision of financial support to businesses,” Chung said. This week, Fitch Ratings analysts downgraded China’s annual growth forecast to 3.7% on the basis of “a cautious pace of deregulation related to pandemics.” This is well below China’s goal of a full-year growth rate of around 5.5%. – AFP
