China’s Economy Went Deeper Into The Doldrums

China’s Economy Went Deeper Into The Doldrums

about 1 year ago2 mins

Data out on Wednesday showed that China’s economic activity slowed even further last month, as Covid infections and restrictions played havoc with industry.

What does this mean?

Irate citizens are just one result of China’s ongoing restrictions: business has also taken quite a bruising. Over half of Chinese firms reported Covid cases in the workforce last month, as November’s infections hit an all-time high. And with the country’s uber-strict Covid rules still in force, it’s no surprise that’s sapping manufacturing: gauges measuring raw material stock, new orders, and employment all shrank in November, taking the overall activity reading for the sector to the lowest since April. And the results in other areas, like services and construction, didn’t make for pleasant reading either, notching up shiver-inducing contractions of their own.

China economic activity

Why should I care?

Zooming in: Lower your expectations.

This data will be another blow to the Chinese government, which was once counting on economic growth of 5.5% this year. Economists at Bloomberg now reckon the figure will be more like 3% – and this week the International Monetary Fund warned that it may have to cut its 3.2% prediction even further. But experts are hopeful the government will beef up economic stimulus in response, including cutting interest rates, to offset some damage and help spur a recovery.

IMF growth forecast China

The bigger picture: Or just relax.

The Chinese government could always just ease up on its zero-Covid stance, of course – a path it already seems to be taking in manufacturing-heavy Guangzhou. On Wednesday authorities relaxed restrictions in about half of the region’s districts, despite Covid cases numbering in the thousands. And the uncharacteristic move has caught the eye of investors: it seems they’re hoping this signals a tactical pivot, which might be why a key index tracking Chinese stocks in Hong Kong jumped 2%, to close out November with the biggest monthly rise in 19 years.

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