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New Wave: COVID Infections In China Shade Economic Recovery | Business and economic news

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From hotel reservations canceled before Lunar New Year to steel stacked in factories due to transportation curbs in Hebei province, China’s battle against a new wave of COVID-19 infections obscures what has been a dramatic economic recovery.

New cases of coronavirus in China are at their highest level in 10 months, causing the lockdown of 28 million people in two provinces, disrupting logistics and industrial activity, with millions expected to abandon travel plans holiday in one blow to China’s efforts to get consumption back on track.

Given the limited geographic spread of the outbreaks and improved testing and containment, economists don’t expect anything that comes close to a repeat of what happened in the first quarter of the year. last, when the emergence of the coronavirus caused the world’s second-largest economy to contract 6.8. percent.

Thanks in part to growing global demand for Chinese-made electronics and equipment to protect against the coronavirus, China appears to be the only major economy to grow in 2020, with expected growth of 2.1%.

Manufacturing and export demand remains robust. But economists believe that consumption, which typically accounts for more than half the economy and has lagged behind the general recovery, could suffer.

Authorities have urged people not to travel during the week-long Lunar New Year holiday, which begins on February 11 and is usually a time for travel, food and gifts.

“The worsening coronavirus situation will have an impact on economic activity, and markets may need to moderate their expectations of strong pent-up consumer demand over the upcoming LNY vacation,” analysts wrote. Nomura in a note this week.

The epidemic and social distancing measures “add conviction” to Nomura’s forecast that policymakers will moderate measures to dampen the stimulus and slow credit growth, and delay rate hikes until 2022, he declared.

But Julian Evans-Pritchard, senior economist for China at Capital Economics, said there could be an economic benefit.

“One of the reasons that many manufacturers were quick to join official efforts to discourage travel is that it would allow them to run factories during the holidays,” he wrote in a note Friday.

Transportation troubles

In the Hebei Province steel plant, which surrounds Beijing and has seen cities locked down to contain the outbreak, steel inventories have jumped 11% this year, according to data from consulting firm Mysteel, sources from industry blaming transportation restrictions.

In Tangshan City of Hebei, more than a third of steel mills have coke supplies of less than seven days, suggesting supply shortages, and weekly blast furnace capacity utilization rates have plummeted. this week by 1.7% from last week and 7% from a year earlier, according to Mysteel data.

“The COVID situation may not improve quickly, but the impact will not be as big as it was during Lunar New Year last year,” said Zhang Yiping, an economist at China Merchants Securities in Shenzhen.

Canceled games

The recovery in consumption in China was slower than that in factory output or investment, although retail sales recorded the fourth consecutive month of year-over-year growth in November.

Gubei Watertown, a tourist spot at the foot of the Great Wall of China, has suffered cancellations of 8,900 room reservations as well as numerous year-end conferences, said Chen Xianghong, president of Wuzhen Tourism Co Ltd, the one of its owners, on Twitter. like the Weibo site on Thursday.

“We cannot close, but staying open is a loss,” he said.

Many companies that would normally host parties are canceling events, while cities have advised couples to delay wedding banquets.

Alcohol giant Kweichow Moutai, based in Renhuai in Guizhou province, told employees to stay put.

“Not all employees are allowed to leave Renhuai, participate in rallies or visit public places such as karaoke bars, bars or internet cafes,” according to a staff advisory reported by state media this week.


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