China's Economic Activity Normalization Difficult Before May

[Asia Economy Beijing=Special Correspondent Sunmi Park]#. "Because the public security suddenly bursts in to conduct spot inspections, only up to two people can sit at one table. Even with two people sitting, a 1m distance must be maintained, so you must sit diagonally at the ends of the table instead of facing each other. The adjacent table will be left empty." In China, where the spread of COVID-19 is calming down, restaurants and bars that had closed since mid-January are gradually reopening one by one. However, due to stricter operating conditions and a sharp drop in customer visits, most places are operating at less than half their usual capacity.

Although the Chinese government states that the COVID-19 prevention situation is continuously improving and economic activities are recovering rapidly, in reality, the restrictions caused by COVID-19 prevention measures are severe, and there are strong concerns that both production and consumption within China have a long way to go before returning to normal.

On the 20th, Bai Ming, Deputy Director of the International Market Research Institute under the Ministry of Commerce of China, said in an interview with the Chinese media Global Times, "The COVID-19 pandemic has globally impacted both health and the economy, putting additional pressure on the recovery of the Chinese economy," adding, "The resumption of factory operations in China during the pandemic does not mean that factory operations have returned to normal. The level of resumed operations varies. Some parts of the supply chain may be running, but other parts remain halted." He said, "The world's second-largest economy, China, will not return to pre-COVID-19 levels by the second half of the year."

Recently, Anxin Securities in China also publicly stated, "It will be difficult to achieve nationwide normalization of economic activities before at least May," diagnosing, "In Guangdong Province, where manufacturing is concentrated, it was initially expected that economic normalization would be possible around the end of March, but the situation has changed. Economic activities will not return to normal levels until April or May."

China Industrial Production Growth Rate (January-February -13.5%) / National Bureau of Statistics of China

The gap between the level of economic activity normalization announced by the Chinese government and the economic activity temperature felt by companies and small business owners is stark.

The National Development and Reform Commission (NDRC) of China announced on the 16th that the nationwide factory operation resumption rate is over 90%. The NDRC stated, "As factory operations resume sequentially, nationwide electricity consumption has noticeably increased," and "excluding Hubei Province, the nationwide factory operation resumption rate has exceeded 90%, and Zhejiang Province, Jiangsu Province, Shanghai, Shandong Province, Guangxi Province, and Chongqing City have already approached 100%."

However, there are numerous reports from various parts of China that even though factories have resumed operations, workers have not fully returned to their duties, and supply chain disruptions have caused a significant drop in operating rates.

Mr. Jang, who manufactures toys in Yiwu, Zhejiang Province, said, "So far, production has resumed up to 80% of normal levels, but many companies have not yet recovered their production capacity. Moreover, due to the overseas COVID-19 outbreak situation, orders are being delayed or even canceled more frequently." The Chinese economic media Caixin pointed out that the factory operation resumption rates announced by the government may not be accurate, alleging that factories are inflating electricity consumption by running air conditioners in empty factories as a facade for resuming operations, and that this atmosphere has emerged under the central government's pressure to normalize economic activities.

The Hong Kong South China Morning Post (SCMP) cited the differing epidemic prevention measures applied by local governments, contrary to the central government's economic normalization directives, as the reason for the delay in China's economic activity normalization. Despite the existence of 'green' permits allowing external vehicles to enter cities, many places do not permit this, causing problems for workers returning to their workplaces. It also pointed out that many places impose mandatory 14-day quarantine on people coming from other regions regardless of whether they are from high-risk or low-risk areas, so even if workers return to the area where their workplace is located, they still cannot work.

As economic activity normalization is delayed, the diagnosis that China's first-quarter economic growth rate may record a negative figure is gaining traction. For China's first-quarter economic growth rate, UBS forecasts -5%, Standard Chartered Bank -4.2%, and Goldman Sachs -9%. Already, retail sales, industrial production, and fixed asset investment in January and February this year have experienced double-digit declines compared to the same period last year, indicating economic recession.

This content was produced with the assistance of AI translation services.