As Beijing talks up stimulus packages, official data published over the weekend shows just how sharply the rolling municipal lockdowns are tanking the Chinese economy, making the stated goal of 5.5% GDP growth in 2022 a huge challenge.
China’s manufacturing activity slumped to its lowest level since February 2020, official data showed on Saturday.
Official economic data released on Saturday showed manufacturing and services activity at their lowest levels since the pandemic exploded from Wuhan in early 2020. China’s purchasing managers’ non-manufacturing index, composed of the services and construction sectors, fell to 41.9 in April, deteriorating from 48.4 the month before and well below the 50-point threshold that indicates expansion rather than contraction. The manufacturing PMI, a crucial gauge of factory activity in the world’s most important growth engine, eased to 47.4, from 49.5 in March, National Bureau of Statistics data showed.
China’s April steel PMI was down to 40.5, from 44.3 in March.
Chinese media group Caixin also released its own manufacturing purchasing managers’ index on Saturday, showing a second straight month of deterioration, with the figure dropping from 48.1 to 46.0.
The Caixin survey, which covers small and medium-sized enterprises, is seen by some as a more accurate reflection of China’s economic situation than the official government figures, which more closely track the condition of large state-run groups.
Covid control measures have done a number on logistics
“Covid control measures have done a number on logistics,” said Caixin Insight Group senior economist Wang Zhe in a statement.
Caixin also noted that firms expressed concerns over how long Covid restrictions would remain in place with the situation in Shanghai, under lockdown for more than a month, especially bleak.
China’s commercial capital was dealt a blow on Monday as authorities reported 58 new Covid-19 cases outside areas under lockdown, while Beijing pressed on with testing millions of people on a May Day holiday few were celebrating.
Joerg Wuttke, president of the EU Chamber of Commerce in China, told German business title The Market last week that freight traffic volumes in the Shanghai metropolitan area plunged by 81% year-on-year in the first three weeks of April. Neighbouring Jiangsu province recorded a drop of 30%. Nationwide, freight volumes in April are down 15% year-on-year, according to the European Chamber.
“Supply chains within China are so tightly knit that lockdown measures in one place have ripple effects on other regions,” Wuttke said.
About 345m people are living under full or partial lockdowns across 46 Chinese cities, according to estimates made last week from Japanese bank Nomura.