Due to the large-scale outbreak of the CCP virus, data released by the National Bureau of Statistics of the Communist Party of China on March 31 showed that China’s manufacturing purchasing managers’ index (PMI) in March recorded 49.5%, down 0.7 percentage points from the previous month; non-manufacturing PMI recorded 48.4%, down 3.2 percentage points from the previous month. Both PMI indexes fell below 50%.
The PMI index is considered to be the leading index of the macro economy and a sign of economic prosperity. It takes 50% as the dividing line, that is, the line of prosperity and decline. Above 50 indicates expansion of economic activity, and below 50 indicates contraction of economic activity. The two major indicators both fell below the line of prosperity and decline, indicating that China’s economic prosperity is sluggish and faces severe downside risks.
Zhao Qinghe, a senior statistician at the Service Industry Survey Center of the National Bureau of Statistics of the Communist Party of China, said on March 31 that the recent clustered epidemics in many places in China, coupled with the significant increase in international geopolitical instability, have affected the production and business activities of Chinese enterprises.
Jiemian News quoted Sun Yongle, a macro analyst at Hongta Securities, pointing out that the epidemic is the main factor causing the weakening of the manufacturing sector. Since March, the new round of the epidemic has had a significant impact on domestic production and consumption. Affected by this, the short-term domestic economic prosperity has dropped significantly.
Since March, the CCP virus outbreak has re-emerged in many provinces and cities in China, affecting many first- and second-tier cities, affecting the production and life of enterprises and residents. Due to the lack of uncertainty in China’s economic outlook, residents and businesses are even less eager to consume and invest, thus exacerbating the weakness on the demand side.
Sun Yongle said that in addition to the epidemic, overseas geopolitical conflicts have led to increased pressure on imported inflation, and the prices of some upstream raw materials have risen. The cost has a certain impact on the production of industrial enterprises.
The point is that in the case of weak demand, it is difficult for companies located in the middle and lower reaches of the industrial chain to raise prices. The continuous widening of the scissor gap between the producer price index (PPI) and the consumer price index (CPI) has put pressure on the profitability of many mid-stream and downstream companies. This pressure is reflected in the fact that the PMI of medium-sized manufacturing companies once again fell below the line of prosperity and decline.
According to the official classification of the Communist Party of China, in the industrial field, enterprises with 300 to 1,000 employees and operating income between 20 million and 400 million yuan are medium-sized enterprises. It can be seen that medium-sized manufacturing enterprises are the mainstay of most industries. A decline in industry sentiment, reflected in most mid-sized manufacturing companies, usually also means the economy is struggling.
Data from the Chinese Communist Party’s Bureau of Statistics on March 31 shows that the shrinking of the demand side is almost omnidirectional, and even infrastructure investment, which is the main focus of fiscal policy, is not optimistic. The data show that the non-manufacturing PMI construction industry new orders index recorded 51.2%, a decrease of 3.9 percentage points from the previous month, reflecting the slowdown in demand in the construction industry; at the same time, the non-manufacturing PMI construction industry employment index recorded 50.1%, compared with the previous month. It fell by 5.7 percentage points last month, reflecting a sharp drop in the employment boom in the construction industry.
The Ministry of Commerce of the Communist Party of China admits that foreign trade enterprises are facing greater operating pressure
According to the official website of the Ministry of Commerce of the Communist Party of China on March 31, in response to questions from foreign media at a regular press conference that afternoon, spokesperson Shu Jueting said that from the current situation, some foreign trade enterprises are affected by the epidemic and face production and operation obstruction, logistics and transportation. Periodic problems such as sluggishness.
She said that as problems such as rising raw material costs, poor cross-border shipping, and supply chain bottlenecks have not been fundamentally alleviated, “foreign trade enterprises, especially small and medium-sized enterprises, are still facing greater operational pressure.”
Affected by the Omicron variant, local cases in mainland China have increased significantly since March, which has a greater impact on manufacturing and foreign trade cities such as Shanghai, Shenzhen, and Dongguan.
China’s economy is facing internal and external troubles, and the downward pressure on the economy is increasing. Chinese Premier Li Keqiang called for the introduction of policies to stabilize the economy as soon as possible.
China’s state media CCTV reported on Wednesday (March 30) that Li Keqiang said at the National Standing Committee on Tuesday (March 29) that he should “put stable growth in a more prominent position”, introduce policies to stabilize the economy as soon as possible, and increase national debt. release strength.
Li Keqiang also said that the current international situation is more complex and severe, and the downward pressure on the domestic economy is increasing. The policy of stabilizing the economy is not conducive to stabilizing market expectations, and a plan to deal with greater uncertainty may be formulated.
Shanghai’s complete closure of the city may hit the economy hard
The authorities in Shanghai have imposed tougher lockdown measures due to the rapid development of the epidemic, making experts less optimistic about the Chinese economy.
Shanghai, with a population of 25 million, is China’s economic and financial center, and it is also the hardest hit by this wave of epidemics. The number of confirmed cases in Shanghai has been in the thousands in recent days, frequently breaking records. The Shanghai government announced that the new epidemic prevention measures are “adopting global static management and nucleic acid screening of all staff”. At 3:00 a.m. local time on Friday, Puxi implemented a “closed city” measure.
A strict lockdown in Shanghai alone could reduce China’s real GDP by 4% during the lockdown, according to estimates by researchers at the Chinese University of Hong Kong, Bloomberg reported. Economists have warned that the economy will slow further if lockdowns in Shanghai and elsewhere continue to expand.
Logistics companies said that the movement of goods to Shanghai ports and airports has slowed significantly and delays are expected.
Lu Ting, chief China economist at Japan’s Nomura Holdings, predicts that due to the escalation of epidemic prevention measures such as lockdowns and social distancing, “China’s PMI index will continue to decline.” Mikron variant, which is likely to be a serious blow to the Chinese economy.”