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China's economy is suffering from corona measures: small businesses under pressure


As the rest of the world tries to live with the virus, China continues to pursue its zero-Covid strategy. The restrictions are a burden for companies. The unofficial indicators are alarming.

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Beijing Covid testing site: Second straight monthly decline

Photo: Andy Wong/AP

China's economy is suffering from lockdowns and other restrictions in the fight against the pandemic.

While an official economic barometer only showed a slight upward trend on Friday, an independent leading indicator in the manufacturing sector fell surprisingly sharply.

Sentiment in the service sector also deteriorated more than expected.

"The downward pressure has increased," noted chief economist Wang Zhe of the business magazine "Caixin".

The weakness of the second-largest economy is bad news ahead of the five-yearly Communist Party Congress that begins Oct. 16 in Beijing.

After ten years, head of state and party leader Xi Jinping wants to be confirmed at the party conference for an unusual third term.

In the second quarter, growth fell to just 0.4 percent.

Experts expect that the government's growth target of 5.5 percent for this year will be missed.

The World Bank significantly reduced its forecast for China this week to 2.8 percent.

World Bank skeptical

The statistics office reported that the purchasing managers' index (PMI) for manufacturing rose to 50.1 in September from 49.4 in the previous month.

The official index primarily measures the mood in large and state-owned companies, which are benefiting from the strong aid that is intended to boost the economy.

On the other hand, the index of the well-known magazine "Caixin", which includes more private and medium-sized companies, fell surprisingly sharply from 49.5 to 48.1 points.

It was the second monthly decline in a row.

A value below the 50-point mark indicates a reduction in the capacity of the industry, while expansion is assumed above that.

According to the statistics office, the official index in the service sector, which also includes the ailing construction sector, fell to 50.6 points from 52.6 in August – also more than predicted.

Negative effects of the Covid controls

"Overall, the pandemic situation remains serious and complicated, and the negative impact of Covid controls on the economy is clear," said Caixin expert Wang Zhe.

“Entrepreneurs are much less optimistic.” For them, the impact of the pandemic measures is the strongest factor in the downturn.

Both supply and demand eased in September, Caixin reported.

"The labor market was weak." Logistics and transport are slightly sluggish.

"The economy's biggest problems are insufficient employment, sluggish demand and fickle expectations," Wang Zhe said.

In the past few weeks, there have been outbreaks of Covid in many regions, which have been responded to with lockdowns, mass tests and other restrictions.

As the rest of the world tries to live with the virus, China continues to pursue a zero-Covid strategy to nip any outbreak in the bud and prevent healthcare systems from being overwhelmed.

China's Prime Minister Li Keqiang is currently holding one crisis meeting after another to initiate a recovery.

Most recently, the prime minister admitted that weak demand was an "acute challenge".

Efforts are also being made to keep logistics "smooth" and the supply of coal, electricity and other energy "stable," said the prime minister, without going into specifics about repeated, nagging bottlenecks.


Source: spiegel

All business articles on 2022-09-30

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