China’s epidemic prevention measures limit the heavy losses of the travel service industry
In the wake of another massive outbreak of the CCP virus, many Chinese provinces have implemented strict anti-epidemic measures, stemming the movement of people and curbing consumer spending.
Caixin media and research firm Markit announced on Wednesday morning that Caixin China’s services purchasing managers’ index (PMI) fell sharply to 42 in March from 50.2 in February, and the service industry has fallen back into contraction, with a significant rate of contraction for 2020. The worst decline in February since the outbreak of the CCP virus.
A PMI above 50 indicates expansion in service sector activity, and a reading below 50 indicates contraction.
The survey, which focuses more on small and medium-sized companies in coastal areas, is in line with indicators from the official survey, which also shows a deterioration in the development of the services sector.
The National Bureau of Statistics of China previously announced that the non-manufacturing business activity index fell sharply to 48.4 in March, which was 3.2 percentage points lower than the previous month.
Contact-intensive service industries such as transportation, hotels and restaurants have suffered the most, Reuters reported, citing analysts, casting a shadow over prospects for a much-anticipated rebound in consumption this year.
The new business sub-index has fallen for a second straight month, with the pace of decline accelerating and the fastest since March 2020. Input prices for businesses rose in March after falling to a six-month low in February.
The outbreak and weak demand have reduced companies’ appetite for new workers, leading to a decline in the employment sub-index.
Wang Zhe, a senior economist at Caixin Think Tank, said that the latest round of the epidemic has dealt a heavy blow to China’s service industry. At present, China is facing the most severe epidemic situation since the beginning of 2020. At the same time, external uncertainties have increased, the prospects of the situation in Russia and Ukraine are unclear, and the commodity market has fluctuated greatly.
China’s service sector activity fell sharply in March, the fastest rate of decline since the outbreak of the new crown epidemic, as anti-epidemic measures in some major cities forced many people to stay at home, hitting consumer spending hard, Wang Zhe said.
Indicators showed that employment in the services sector fell again, while demand for new orders and exports also fell. Business confidence fell to a 19-month low.
He believes that the resonance of various factors has intensified the downward pressure on China’s economy, and the risk of stagflation has become prominent.
On the afternoon of April 5, Xuzhou City held a press conference on epidemic prevention and control, stipulating that if the enterprise is temporarily unable to pay wages due to business difficulties caused by the government’s emergency measures such as suspension of work and business, the labor payment can be temporarily postponed after consultation with the trade union or employees. wages, the extension shall not exceed 30 days.
Although the government allows companies to default on wages, banks will not stop calculating interest, and will not easily allow ordinary people to stop car loans and mortgage loans. With income falling and rigid spending unchanged, social consumption is likely to fall further. It is easy to reach a vicious circle of declining “income-expenditure” in the residential and corporate sectors.
Tomb-sweeping Day consumption drops sharply
The three-day Qingming Festival holiday ended on Tuesday saw a 26.2% year-on-year drop in the number of tourist trips from mainland China, the Ministry of Culture and Tourism said on Tuesday. This underscores the impact of the containment measures.
According to the data center of the Ministry of Culture and Tourism, during the 3-day Qingming Festival holiday in 2022, 75.419 million domestic tourism trips will be made in China, a year-on-year decrease of 26.2%, and it will recover to 68.0% of the same period in 2019 on a comparable basis; domestic tourism revenue will be 18.78 billion yuan, It decreased by 30.9% year-on-year and recovered to 39.2% in the same period of 2019.
The number of tourists and tourism revenue have fallen sharply compared with 2021 and 2019 before the epidemic, mainly due to the severe epidemic situation and strict control policies in various places.
On April 6, Lei Zhenglong, deputy director of the CDC’s Bureau of Disease Control and Prevention, introduced that from March 1 to April 5, a total of 176,455 local infections were reported nationwide, affecting 29 provinces. Sexual outbreaks are intertwined with sporadic outbreaks, and spillover cases and secondary outbreaks are frequent.
The current restrictions on the movement of people implemented across China have led to a decline in the efficiency of economic operation, and the entire society has further turned bearish on the economic outlook.
In this round of epidemic, although the number of infected people in Beijing is relatively small, under the influence of more than two years, residents’ consumption has become more and more conservative. This year’s Qingming holiday, Xidan Joy City’s passenger flow has dropped sharply, the flow of people on each floor is sparse, and the occupancy rate of the catering industry has greatly increased. It is basically impossible to see the hot scene of queuing for meals in previous years.
The Wall Street Journal reported on April 6 that on Tuesday (April 5), the Chinese authorities extended a comprehensive lockdown of Shanghai, adding to a new round of concerns about the global supply chain. Logistics operators say the restrictions have made it difficult to transport goods and keep factories operating at full capacity.
The number of cargo ships waiting for berths in Shanghai and the nearby port of Ningbo is increasing, according to data from Kuehne+Nagel International AG, a Swiss-based global logistics operator. About 100 cargo ships were waiting to dock on Monday (April 4), up from 82 on Friday (April 1) and 62 on January 1, the data showed.
A Dexun spokesman said the ports were open, but operations had slowed due to manpower shortages. The spokesman also said the bigger challenge is inland, where delays caused by COVID-19 testing requirements and other public health restrictions have plagued local truck drivers.
Aaditya Mattoo, chief economist for East Asia and the Pacific at the World Bank, said the continued disruption of the coronavirus outbreak poses a risk to global supply chains, and the severity of the disruption depends on how long it lasts.
Li Keqiang calls for more support for the real economy
The CCP virus outbreak has exacerbated the dilemma of the Chinese economy, especially exports and consumption, which have been hit the most.
According to Bloomberg, Chinese Premier Li Keqiang chaired an executive meeting of the State Council on Wednesday (April 6).
Li Keqiang stressed at the meeting that he would step up efforts to support the economy, promised to use monetary policy tools at the appropriate time, and considered other measures to boost consumption.
The meeting stated that the complexity and uncertainty of the domestic and foreign environment have exceeded expectations, and the situation appears to be challenging. The world economic recovery has slowed down, the Russian-Ukrainian war has caused soaring food and energy prices, the commodity market has fluctuated sharply, and Shanghai and other places have implemented blockades to contain the worst epidemic in two years. Big. On top of that, the economy has faced a slump in the housing market and weak consumer spending since last year.
As the downward pressure on China’s economy increases, Li Keqiang has called for policies to stabilize the economy as soon as possible at the National Congress on March 29.
Li Keqiang said at the meeting that the current international situation is more complex and severe, and the downward pressure on the domestic economy is increasing. We must put stable growth in a more prominent position, and policies to stabilize the economy must be implemented early and quickly, and the formulation of responses may encounter greater uncertainty. sex plan.
Li Keqiang proposed to “deploy and use government bonds to expand effective investment” to drive consumption to expand domestic demand and promote stable employment growth. This year, 3.65 trillion yuan ($547.3 billion) of local government special bonds were added, and a quota of 1.46 trillion yuan was issued in advance at the end of last year in order to strengthen cyclical adjustment.
A week later, Li Keqiang once again offered to support the real economy, showing that he was deeply disturbed by the dire situation facing the Chinese economy.
The poor performance of China’s economy has also made the CCP’s regulators face a formidable enemy and urgently discuss countermeasures.
The website of the Central Bank of the Communist Party of China reported on April 1 that the bank held a video conference on financial stability work in 2022, requiring the financial stability system to continue to “stabilize the overall situation” and “precisely defuse bombs” this year, and do a good job in preventing and defusing financial risks.
The meeting emphasized that it is necessary to “clearly understand” the current situation and challenges facing financial stability, and that prevention and control of financial risks should not be “slack”.
The Wall Street Journal reported on March 31 that under the impact of the CCP virus epidemic, China’s economic losses have only just begun to emerge, with companies shutting down production and work, and domestic logistics network congestion has caused a drag on the global supply chain. Meanwhile, hundreds of restaurants, retailers and other service businesses were temporarily closed.
Robin Xing, chief China economist at Morgan Stanley, said the CCP’s dynamic anti-epidemic policy will disrupt China’s economy and erode the resilience of its supply chain.
Xing Zhaopeng, an economist at Australia and New Zealand Banking Group (ANZ), speculates that Shanghai’s lockdown measures may have to be maintained until early May, which means further pressure on the Chinese economy.
Capital Economics said the disruption caused by the current CCP virus variant Omicron is destined to outweigh the economic downturn in China caused by the CCP virus variant Delta outbreak last year.