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China’s economy showing increasing strain from Covid-19 tsunami

China’s economy continued to slow in December as the massive Covid-19 outbreak spread across the country, with activity slumping as more people stay home to try to avoid getting sick or to recover.To get more latest news in china economy, you can visit shine news official website.

Bloomberg’s aggregate index of eight early indicators showed a contraction in activity in December from an already weak pace in November, and the outlook is grim for the new year.

Although there is no reliable data on the extent of the spread of the virus or the number of sick and dead now, infections had reached every province before the end of extensive and regular testing.The cancelling of almost all domestic restrictions now means that the virus can circulate freely.

Even before Covid-19 curbs were lifted, China’s economy was already struggling, with a slump in consumer spending deepening and industrial output growing the slowest since the spring lockdowns.

The situation was even worse for shops and restaurants in Beijing than it was across the nation as a whole, with retail sales in the city dropping almost 18 per cent in November, as both cases and restrictions in the capital increased.However, even though people are now free to move around, there has been little rebound in movement so far in December, according to high-frequency data on subway and road usage. The 3.6 million trips made on the Beijing subway last Thursday were 70 per cent below the level on the same day in 2019, and traffic congestion on the city’s streets was only 30 per cent of the level in January 2021, according to research provider BloombergNEF.

Other major cities such as Chongqing, Guangzhou, Shanghai, Tianjin and Wuhan, are seeing a similar drop.

This looks to be impacting home and car sales – both fell in the first weeks of December.

Car sales had been supported by government subsidies and were a bright spot for consumer spending in 2022, but began dropping in November as consumers pulled back.This, in turn, hit industrial output, with production of cars dropping for the first time since May, when many factories were forced to close.

The spread of the virus across China now has undermined the initial euphoria seen in the stock and commodity markets at the reopening. The Shanghai Composite Index has fallen back near the level it was at just before the authorities started relaxing curbs on Nov 11, and has dropped for the past two weeks.

The price of iron ore is also headed for a modest weekly drop as a surge in Covid-19 cases clouded the near-term demand outlook and undermined the effect of recent announcements of support for the real estate sector.

Chinese steel mills are currently reducing production, Guangfa Futures said in a note, with data from an industry association showing output falling and stockpiles rising in the middle of December.

The drop in markets mirrors the poor confidence among small businesses, which were in contractionary territory for a third straight month in December, according to a Standard Chartered Bank report.

Although there was a small improvement from November, the main indexes still showed that smaller firms were not optimistic about the current situation or the future.

The manufacturing sector saw some improvement, with a rise in new orders, sales and production from November likely reflecting the positive impact of the relaxation of Covid-19 control, said the StanChart report.

However, small and medium-sized enterprises in the service sector continued to face headwinds from weak consumer sentiment amid rising Covid-19 cases, it added.