[Epoch Times, May 6, 2022](Reported by Epoch Times reporters Ning Haizhong and Yi Ru) Mainland Caixin Media and the CCP’s official data for the first four months all show that China’s economic downturn has entered its lowest level since March 2020. Experts told The Epoch Times that China’s economy will enter the worst-case scenario, and insisting on a zero-epidemic policy will offset other efforts by the authorities to protect the economy.
The latest Caixin Services Purchasing Managers’ Index (PMI) released on May 5 showed that the PMI fell to 36.2 in April, the second-lowest since survey records began in November 2005, down from 42 in March.
The index’s biggest contraction on record occurred in February 2020, amid the COVID-19 pandemic in Wuhan, when the index hit 26.5. A PMI above 50 indicates expansion in service sector activity, and a reading below 50 indicates contraction.
The trend of the Caixin service industry PMI in April was in line with the trend of the official data of the Communist Party of China. The two previously announced official PMIs and the Caixin manufacturing PMI continued to shrink.
American scholar: China’s economic situation has been deteriorating since the outbreak in Wuhan
For the comparison between Caixin and the CCP’s official data after the outbreak of the Wuhan epidemic in 2020, Xie Tian, a professor at the University of South Carolina Aiken School of Business, analyzed the Epoch Times that from the outbreak of the Wuhan epidemic to the present, China has actually been in the past two years. The economic situation has continued to deteriorate.
“Now, due to the suspension of work and the severe closure of cities due to the plague, China’s industrial output will drop significantly. According to a study by a Hong Kong scholar, if the cities of Beijing, Shanghai, Guangzhou and Shenzhen start to be closed together, China’s economic GDP can be reduced in one month. A percentage or two down, it’s that serious.”
Xie Tian said that in addition to the weakening of economic activity caused by the closure of the city, China’s imports and exports, one of the economic troikas, are also beginning to decline. While last year hit an all-time high, the pace of growth is slowing. And countries around the world have begun to end the blockade of the epidemic and began to organize production on their own, so China’s share will decrease rapidly.
“Another indicator is that Shenzhen is the location of the top export-intensive industries in China’s Pearl River Delta. Now Shenzhen’s overseas orders, European and American orders have been surpassed by Vietnam. The industrial chain is shifting, and orders are lost to countries such as Japan, Indonesia and India. It is also accelerating, and this is China’s external environment.”
Xie Tian also said that with China’s import and export slump, the shortage of foreign exchange reserves has become more and more serious. Defaults by real estate companies are also increasing. China’s real estate sales fell very fast, coupled with the impact of worldwide inflation on China, resulting in rising food and energy prices. The Ukrainian war also has an impact on the CCP’s economy. Companies from all over the world see that the CCP’s support of Russia may face sanctions, which will lead to a greater financial crisis and a shrinking export market for China.
He said that all factors are now causing the Chinese economy to decline rapidly. “I think the Chinese economy is already in a deep recession.”
Xie Tian said that the current official measures are mainly to engage in infrastructure construction, and to stimulate the development of the real estate market by cutting interest rates and reserve requirements, and then encouraging exports, but I am afraid the effect will not be very large.
“China’s real estate market is already very weak, and now officials are expecting large-scale infrastructure investment, but we know that this will lead to high debts for local governments. In fact, it is completely repetitive and wasteful investment. I think these measures by the CCP are basically drinking poison to quench thirst, It might be irritating, but it might not be as effective.”
Taiwan expert: closing the city offsets all the ways to save the economy
Taiwanese financial expert Huang Shicong told The Epoch Times that it is different from when the epidemic broke out in Wuhan. At that time, the impact was mainly in Wuhan, and the closure time was concentrated, and the impact on the economy could be recovered later. But this time, the impact is relatively large, because many cities are closed at different times. Supply chains have been disrupted across China.
In addition, there are external factors. Because of the relationship between the Russian-Ukrainian war, the price of raw materials is soaring, and the global economic growth rate is not good this year, which will deepen the pressure on the Chinese economy.
“Also, the consequences of the CCP’s suppression of technology companies and real estate companies in recent years are showing. Now is the worst time for China to happen.”
Huang Shicong said that the cities that are currently closed or softly closed – Shenzhen, Guangzhou, Zhengzhou, Shanghai, Kunshan, Suzhou, these places are very important to China’s economy. So the economy will not be good in the second quarter.
He said that after Xi Jinping said that he hoped that the economic growth of this year would exceed that of the United States, officials began to relax some control measures, but said that it was to relax the loosening of real estate, but the people were locked at home and could not buy a house.
“So I think the key point is that China’s epidemic prevention policy needs to be changed to be the same as the world‘s, and the biggest uncertainty will disappear. Otherwise, no matter how much loosening and stimulus measures you take, the effect will be offset by the lockdown.”
The CCP has always adhered to the zero-epidemic prevention policy marked by the closure of the city. Chinese Premier Li Keqiang has also held economic conferences many times, revealing that the Chinese economy is facing serious problems due to the closure of the city.
The Politburo meeting on April 29 acknowledged that China’s economic development environment is grim.
On May 5, Li Keqiang presided over an executive meeting of the State Council, requesting to help foreign trade enterprises deal with difficulties. The meeting decided that first, we should focus on securing orders and stabilizing key industries; second, we should effectively and orderly clear the collection and distribution of sea and airport; third . To introduce policies to facilitate cross-border e-commerce export returns and exchanges; 4. To increase credit for foreign trade enterprises.
However, at a meeting of the Standing Committee of the Political Bureau of the Communist Party of China held on May 5, Xi Jinping emphasized that the prevention and control work is in a critical period of “going against the current, not advancing or retreating”, and we must unswervingly adhere to “dynamic clearing”.
Responsible editor: Fang Xiao#