28/04/2020
BEIJING (Reuters) – China’s factory activity likely rose for a second straight month in April as more businesses re-opened from strict lockdowns implemented to contain the coronavirus outbreak, which has now paralysed the global economy.
The official manufacturing Purchasing Manager’s Index (PMI), due for release on Thursday, is forecast to fall to 51 in April, from 52 in March, according to the median forecast of 32 economists polled by Reuters. A reading above the 50-point mark indicates an expansion in activity.
While the forecast PMI would show a slight moderation in China’s factory activity growth, it would be a stark contrast to recent PMIs in other economies, which plummeted to previously unimaginable lows.
That global slump, caused by heavy government-ordered lockdowns, as well as the cautious resumption of business in China, suggests any recovery in the world’s second-largest economy is likely to be some way off.
“The recovery so far has been led by a bounce-back in production, however, the growth bottleneck has decisively shifted to the demand side, as global growth has weakened and consumption recovery has lagged amid continued social distancing,” Morgan Stanley said in a note.
“The expected slump in external demand has likely capped further recovery in industrial production.”
The latest official data showed 84% of mid-sized and small business had reopened as of April 15, compared with 71.7% on March 24.
Hobbled by the coronavirus, China’s economy shrank 6.8% in the first quarter from a year earlier, the first contraction since current quarterly records began.
That has left Chinese manufacturers with reduced export orders and a logistics logjam, as many exporters grapple with rising inventory, high costs and falling profits. Some have let workers go as part of the cost-cutting efforts.
A China-based brokerage Zhongtai Securities estimated that the country’s real unemployment rate, measured using international standards, could exceed 20%, equal to more than 70 million job losses and much higher than March’s official reading of 5.9%.
Sheng Laiyun, deputy head at the statistics bureau, said on Sunday migrant workers and college graduates are facing increasing pressures to secure jobs, while official jobless surveys show nearly 20% of employed workers not working in March.
Chinese authorities have rolled out more support to revive the economy. The People’s Bank of China earlier in April cut the amount of cash banks must hold as reserves and reduced the interest rate on lenders’ excess reserves.
Source: Reuters
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25/04/2020
- But trade with partner countries might not be as badly affected as with countries elsewhere in the world, observers say
- China’s trade with belt and road countries rose by 3.2 per cent in the January-March period, but second-quarter results will depend on how well they manage to contain the pathogen, academic says
China’s investment in foreign infrastructure as part of its Belt and Road Initiative has been curtailed because of the coronavirus pandemic. Photo: Xinhua
The
coronavirus pandemic is set to cause a slump in Chinese investment in its signature
and a dip in trade with partner countries that could take a year to overcome, analysts say.
But the impact of the health crisis on China’s economic relations with nations involved in the ambitious infrastructure development programme might not be as great as on those that are not.
China’s total foreign trade in the first quarter of 2020 fell by 6.4 per cent year on year, according to official figures from Beijing.
Trade with the United States, Europe and Japan all dropped in the period, by 18.3, 10.4 and 8.1 per cent, respectively, the commerce ministry said.
By comparison, China’s trade with belt and road countries increased by 3.2 per cent in the first quarter, although the growth figure was lower than the 10.8 per cent reported for the whole of 2019.
China’s trade with 56 belt and road countries – located across Africa, Asia,
Europe and South America – accounts for about 30 per cent of its total annual volume, according to the commerce ministry.
Despite the first-quarter growth, Tong Jiadong, a professor of international trade at Nankai University in Tianjin, said he expected China’s trade with belt and road countries to fall by between 2 and 5 per cent this year.
His predictions are less gloomy than the 13 to 32 per cent contraction in global trade forecast for this year by the
World Trade Organisation.
“A drop in [China’s total] first-quarter trade was inevitable but it slowly started to recover as it resumed production, especially with Southeast Asian, Eastern European and Arab countries,” Tong said.
“The second quarter will really depend on how the epidemic is contained in belt and road countries.”
Nick Marro, Hong Kong-based head of global trade at the Economist Intelligence Unit, said he expected China’s total overseas direct investment to fall by about 30 per cent this year, which would be bad news for the belt and road plan.
“This will derive from a combination of growing domestic stress in China, enhanced regulatory scrutiny over Chinese investment in major international markets, and weakened global economic prospects that will naturally depress investment demand,” he said.
The development of the Chinese built and operated special economic zone in the Cambodian town of Sihanoukville is reported to have slowed, while infrastructure projects in Bangladesh, including the Payra coal-fired power plant, have been put on hold.
The development of the Chinese built and operated special economic zone in the Cambodian town of Sihanoukville is reported to have slowed. Photo: AFP
Marro said the reduction of capital and labour from China might complicate other projects for key belt and road partner, like Pakistan, which is home to infrastructure projects worth tens of billions of US dollars, and funded and built in large part by China.
“Pakistan looks concerning, particularly in terms of how we’ve assessed its sovereign and currency risk,” Marro said.
“Public debt is high compared to other emerging markets, while the coronavirus will push the budget deficit to expand to 10 per cent of GDP [gross domestic product] this year.”
Last week, Pakistan asked China for a 10-year extension to the repayment period on US$30 billion worth of loans used to fund the development of infrastructure projects, according to a report by local newspaper Dawn.
China’s overseas investment has been falling steadily from its peak in 2016, mostly as a result of Beijing’s curbs on capital outflows.
Last year, the direct investment by Chinese companies and organisations other than banks in belt and road countries fell 3.8 per cent from 2018 to US$15 billion, with most of the money going to South and Southeast Asian countries, including Singapore, Vietnam, Indonesia and Pakistan.
Tong said the pandemic had made Chinese investors nervous about putting their money in countries where disease control measures were becoming increasingly stringent, but added that the pause in activity would give all parties time to regroup.
“Investment in the second quarter will decline and allow time for the questions to be answered,” he said.
“Past experience along the belt and road has taught many lessons to both China and its partners, and forced them to think calmly about their own interests. The epidemic provides both parties with a good time for this.”
Dr Frans-Paul van der Putten, a senior research fellow at Clingendael Institute in the Netherlands, said China’s post-pandemic strategy for the
belt and road in Europe
might include a shift away from investing in high-profile infrastructure projects like ports and airports.
Investors might instead cooperate with transport and logistics providers rather than invest directly, he said.
“Even though in the coming years the amount of money China loans and invests abroad may be lower than in the peak years around 2015-16, I expect it to maintain the belt and road plan as its overall strategic framework for its foreign economic relations,” he said.
Source: SCMP
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