What's going on?
Yet more data out on Monday showed the toll China’s lockdowns are taking on its economy.
What does this mean?
China’s efforts to keep Covid at bay have kept major cities like Shanghai locked down for weeks, and an influx of data on Monday confirmed how bad things have become. Retail sales fell around 11% in April from the same time last year – the second-straight month they’ve fallen, and almost double the dropoff analysts were expecting. In fact, only sales of medicine, fuel, and food and drink grew from April 2021. Industrial production was down too, dipping for the first time since March 2020. And since the country’s companies suddenly didn’t need as many workers, the unemployment rate climbed to 6.1% – and unemployment among young people hit a new record.
Why should I care?
The bigger picture: Is China finally reopening?
Some economists now reckon the Chinese economy will grow just 0.5% this quarter, but the more hopeful of them think April’s data will mark the worst of the slump. After all, the government said it’s going to let some companies reopen this week, and aims to be back to business as usual by the middle of June. The country’s central bank also cut mortgage rates for first-time homebuyers over the weekend, and optimists reckon there could be more measures to boost the economy on the way.
For markets: Investors welcome their prodigal son.
The prospect that things might only be getting better for the country will give investors even more confidence, after having already sent the Chinese stock market up 2% last week. It’s already working wonders on the professionals: analysts at JPMorgan upgraded their ratings on a bunch of Chinese tech companies – including Alibaba and Tencent – on Monday (tweet this).