China’s economy is under severe pressure as a wave of Covid cases sweeps the country.
Since the world’s second-largest economy drastically eased Covid restrictions earlier this month, there is no clear data on the extent of the virus’ spread nationally. But several cities and provinces said they were seeing tens of thousands of new cases a day.
The rapid spread of the infection drove many people indoors and emptied shops and restaurants. Factories and companies are also forced to shut down or stop production as more workers fall ill.
“The number of people on the streets fell sharply from already subdued levels across the country,” analysts at Capital Economics said in a research note last week. “That will affect demand.”
China’s economy was already in dire straits when Beijing abruptly turned away from its strict zero-Covid policy. Retail sales fell in November due to widespread lockdowns, and unemployment rose to its highest level in six months.
Top leaders have recently signaled a renewed focus on growth next year and have bet on easing pandemic restrictions to boost the economy.
But the statistics do not look promising.
Car and home sales fell in the first few weeks of December. Automakers sold 946,000 vehicles from Dec. 1 to Dec. 18, down 15% from the same period last year, according to the latest statistics from the China Automobile Association. Last week, home sales by square footage fell 44 percent in the 30 largest cities compared to the same week last year, according to Chinese financial data provider Wind. In tier-1 cities such as Beijing and Shanghai, home sales fell 53% last week from a year ago.
The movement of people also dropped sharply.
As of the middle of this month, the number of subway trips is down about 60% in major cities compared to the same period a year ago, according to Wind data.
Nationwide, truckload volume and delivery orders declined last week, according to the statistics of the Ministry of Transport and the regulator of postal services.
Factories also reduced production. Key industries such as cement and chemical fibers reported lower utilization rates of their existing production capacity.
BID, the country’s largest maker of electric vehicles, said it had to cut production by 2,000 to 3,000 vehicles a day as more workers were unable to work.
“The Covid epidemic has seriously affected our production,” Lian Yubo, vice president of BID, said at a forum in Shenzhen on Thursday. “20% to 30% of our employees are sick at home.
He added that the company’s monthly output is likely to remain below its target of 20,000 to 30,000 vehicles for December.
Many factories have been forced to close for weeks due to sick workers and a lack of orders, according to Chinese media.
Caikin reported on Monday that several furniture factories in the eastern province of Jiangsu told employees to have an early, long holiday to celebrate the Chinese New Year. The Lunar New Year holiday falls between January 21 and January 27 this year.
As many as 60% of textile and dyeing companies in the coastal provinces of Guangdong, Zhejiang and Shandong — the country’s main manufacturing hubs — have announced they will halt production and take a two-month long vacation, Securities Daily, a Henan state-run newspaper, said last week. Daily Press Group.
The next few weeks could be the “most dangerous” for China’s battle with Covid, say analysts at Capital Economics.
“Given the migration to rural areas ahead of the start of the Lunar New Year, it is likely that all parts of the country that are not currently in a major Covid wave will soon be,” they said.
“That will further reduce output.”