China’s sluggish economy is reviving as anti-virus curbs are eased and businesses in its commercial capital of Shanghai are allowed to reopen, a Cabinet official said on May 16, while data showed April factory and consumer activity was even weaker than expected.
About half of the 9,000 biggest industrial enterprises in Shanghai are back at work after controls that shut down most of the city starting in late March eased, said Fu Linghui, director of statistics for the National Bureau of Statistics.
The ruling Communist Party is trying to reverse a deepening slowdown without giving up “zero-COVID” tactics that also have shut down sections of Beijing and other major cities to isolate every infected person. Private sector economists have cut economic growth forecasts for this year to as low as 2%, well below the ruling party target of 5.5% and last year's 8.1% expansion.
“We believe the operation of the economy is gradually improving in May as logistics is unblocked to ensure smooth access and support is increased for the real economy,” Fu said at a news conference.
The restrictions that confined most of Shanghai’s 25 million people to their homes prompted concern global manufacturing and trade might be disrupted, adding to upward pressure on inflation in the United States and Europe.
Ruling party leaders said after a May 5 meeting that containing outbreaks would take priority over the economy. Anti-virus controls have shut down factories and other businesses or suspended access to industrial centres including Changchun and Jilin in the northeast and Shenzhen and Guangzhou in the south, as well as smaller cities.
Chinese leaders have promised tax refunds, low-cost loans and free rent to help entrepreneurs that are the country's economic engine. But repeated shutdowns have disrupted manufacturing, retailing and exports. Restrictions that keep families at home hurt consumer spending.
Retail sales plunged 11.1% in April from a year earlier after anti-virus controls closed shops, restaurants and other consumer businesses in Shanghai, Beijing and other cities, official data showed on Monday.
Manufacturing output sank 2.9% after factories closed and those that kept operating with employees living at their workplace were forced to reduce output due to disruption in supplies of components, the data showed.
That has “increased the downside risks” that China will fail to hit this year’s growth target, Rajiv Biswas of S&P Global Market Intelligence said in a report.
The government has yet to gather May data but activity appears to be improving judged by “physical quantity indicators,” said Fu, the statistics official, referring perhaps to freight volumes and power consumption. “I believe the second quarter will maintain good growth momentum,” Fu said.
Shanghai, China’s richest and most populous city, will gradually reopen shopping malls, vegetable markets, hair salons and other businesses starting from Monday, the government announced.
The number of people who are barred from leaving their homes has fallen below one million, said a deputy mayor, Zong Ming, according to the official Xinhua News Agency. Zong said on Sunday the number of commercial outlets operating increased to 10,625 from a low of 1,400.
The Port of Shanghai, the world's busiest, has said operations are normal, but official data show daily cargo volume is off 30%.
Also on Sunday, the central bank said the official lower limit on interest rates for mortgages taken out by first-time homebuyers will be lowered. The official Global Times newspaper said the policy was designed to revive slumping sales while discouraging speculation that might put up politically sensitive housing costs.
“Provided that the virus situation continues to improve, the economy should begin to rebound this month,” said Julian Evans-Pritchard of Capital Economics in a report. “But the recovery is likely to be tepid.”