BEIJING (`) — Wang Jian is eager to return to work to teach basketball to children after China lifted restrictions against COVID-19. But his gym in the eastern city of Shenyang has been closed for a month because all of his trainers are infected.
The most optimistic forecasts suggest that China’s business and consumer activity could recover as early as the first quarter of this year. But before that happens, business owners and families face painful pressures from a surge in virus cases that has left employers without enough healthy workers and kept suspicious shoppers away from malls, restaurants, hair salons and gyms.
“I hope the situation will reverse in March or April without any further COVID shocks,” said Wang, 33, who went without a paycheck for four months when the gym closed amid the virus outbreak. “If parents are afraid of possible reinfection, they simply don’t send their children to training.”
President Xi Jinping’s administration’s abrupt decision to end controls that have closed factories and kept millions of people at home will push up the economic recovery timeline, but could disrupt activity this year as companies scramble to adapt, forecasters say.
“It’s going to be a bumpy process,” said Dong Chen, chief economist for Asia at Pictet Wealth Management.
“People are still struggling with infections, but we believe this may be temporary,” Chen said. “Overall, we think this is a positive surprise.”
The decision to speed up China’s reopening is a boost for the global economy at a time when activity in the United States and Europe is slowing after repeated central bank hikes to cool rising inflation.
It should help revive auto sales and boost demand for imported consumer goods, oil and food in China, one of the largest global markets. Countries like Thailand with large tourism industries are looking forward to an influx of Chinese travelers.
The World Bank and private sector forecasters have slashed estimates of China’s economic growth to as much as 2.2% last year amid a surge in infections that started in early October, and questioned Beijing’s “zero-COVID” goal of isolating every case. The International Monetary Fund expects a rebound to 4.4% this year, but that would still be one of the lowest levels in three decades.
“Zero-COVID” kept China’s infection numbers low, but shut down Shanghai and other industrial cities for two months last year, halting production and shipments. Business groups said global firms were shifting investment plans away from China because regulations requiring overseas visitors to quarantine for a week prevented executives from visiting.
The ruling party pledged on November 11 to reduce costs and disruption. A series of surprising announcements has rolled back travel and other restrictions that health experts and economists had expected to remain in place into mid-2023.
On Sunday, Beijing allowed travelers to enter China without quarantine. The government has yet to say when China will start issuing tourist visas again.
“The sudden, chaotic way in which pandemic policies have been changed means growth is being hampered in new ways,” Rhodium Group’s Daniel H. Rosen, Charlie Vest and Rogan Quinn said in a report. High infection numbers make it “realistic to expect production to be hampered for a significant part of 2023.”
Forecasts say the economy likely contracted in the last quarter of 2022 as the number of virus cases rose and retail spending and trade fell.
Exports contracted after interest rate hikes weighed on US and European consumer demand. That’s forcing Chinese planners to make up for lost overseas sales by trying to boost consumer demand.
“The key to rapid economic recovery” is “to convert income to consumption and investment as much as possible,” one of the country’s most prominent financial figures, Guo Shuqing, secretary of the ruling party of the central bank, told the official Xinhua news agency.
Informal measures show that public and business activity is improving but weak.
Subway ridership this month in 10 major cities recovered to 55-60% of levels a year ago, up from 30-35% last month, according to Macquarie Group. The streets are getting more and more congested.
Foreign companies that see China as a critical market are welcoming the change but struggling, said Eric Zheng, president of the American Chamber of Commerce in Shanghai.
“Companies were unprepared for this abrupt change,” said Zheng, whose group has about 1,000 member companies. “It’s difficult to manage a workforce when a lot of people are getting sick.”
Still, “things are almost getting back to normal,” Zheng said. “Once life returns to normal and consumers start shopping, things will definitely improve.”
Another business group, the American Chamber of Commerce in China, said more than 70% of businesses that responded to a survey last month were confident the wave of infections would last no more than three months and end earlier this year .
The ruling party is trying to boost growth by easing restrictions on real estate financing and ending anti-monopoly and data security crackdowns on tech companies that have caused their stock market values to plummet.
In December, regulators announced that Ant Group, an online financial company that was forced to call off a planned multibillion-dollar IPO in 2020, had invested 10.5 billion yuan ($1.6 billion) for raise its consumption unit and thus more than double the capital.
“These measures are helpful, but not nearly enough to move the needle,” Macquarie’s Larry Hu and Yuxiao Zhang said in a report.
Hotels, restaurants and other businesses hoping for a boost from the Lunar New Year holiday this month, the busiest tourism season, took a hit when some local authorities urged migrant workers to skip traditional visits to their hometowns, which could spread infections.
The operator of the 12-room Oriental Hotel in the eastern city of Hefei, who declined to give only his family name Huang, said he loses 4,000 yuan ($550) a month. Its utilization is at 20%, well below the 50% needed to break even.
“People are staying at home and maybe worried about possible reinfection,” Huang said. “If it stays like this for another year, I’m giving up the hotel.”
The National Health Commission stopped releasing case numbers last month, but reports from city and county governments suggest hundreds of millions of people may have been infected.
Zhengtai restaurant in the northwest city of Jinzhong was closed for two weeks because almost all of its 57 employees were infected, manager Chang Zhigang said. Chang said the company has lost about 2 million yuan ($300,000) annually since the pandemic began.
“We don’t expect the situation to change in a short time as there are very few people on the streets,” Chang said.
___
` researcher Yu Bing contributed.
Copyright © Associated Press. All rights reserved. This material may not be published, broadcast, transcribed or redistributed.
Comments are closed.