Hong Kong
CNN
—
China’s economy is taking a heavy hit as a wave of Covid cases sweeps the country.
Since the world’s second largest economy drastically eased its Covid restrictions earlier this month, there has been no clear data on the extent of the spread of the virus nationally. But several cities and provinces have said they are seeing tens of thousands of new cases a day.
The rapid spread of the infection has forced many people indoors, emptying shops and restaurants. Factories and businesses are also being forced to shut down or scale back production as more workers fall ill.
“The number of people on the streets has fallen sharply from already low levels across the country,” analysts at Capital Economics said in a research note last week. “That will affect demand.”
The Chinese economy was already struggling when Beijing abruptly backed away from its strict zero-Covid policy. Retail sales had fallen in November due to widespread lockdowns and unemployment had risen to its highest level in six months.
Top executives have recently signaled that they will shift the focus back to growth next year and have bet on the easing of pandemic restrictions to boost the economy.
But statistics don’t look promising.
Auto and home sales plummeted in the first weeks of December. Automakers sold 946,000 vehicles from December 1 to 18, down 15% from the same period last year, according to the latest statistics from the China Passenger Car Association. Home sales by square footage in the top 30 cities fell 44% last week from the same week last year, according to Chinese financial data provider Wind. In Tier 1 cities like Beijing and Shanghai, home sales fell 53% last week from a year earlier.
Popular movements have also declined sharply.
Since the middle of this month, the number of subway trips in major cities has fallen by about 60% compared to the same period a year ago, according to Wind data.
Nationwide, both truck freight volumes and delivery orders shrank in the past week, according to statistics from the Department of Transportation and the Postal Inspectorate.
Factories have also scaled back production. Key industries such as cement and man-made fibers have all reported lower utilization rates of their existing production capacities.
BYD, the country’s largest electric vehicle maker, said it had to cut production by 2,000 to 3,000 vehicles a day as more workers were unable to work.
“The Covid outbreak has severely affected our production,” Lian Yubo, vice president of BYD, said at a forum in Shenzhen on Thursday. “20 to 30% of our employees are at home sick.”
He added that the company’s monthly production for December is expected to fall 20,000 to 30,000 vehicles short of target.
According to the Chinese media, many factories had to be closed for weeks due to sick workers and a lack of orders.
Caixin reported Monday that several furniture factories in eastern Jiangsu province have told employees to take an early, long vacation to celebrate the Chinese New Year. The Lunar New Year holiday falls between January 21st and 27th this year.
Up to 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 have a long two-month vacation, according to Securities Daily last week, a state-run Henan newspaper Daily Press Group.
The next few weeks could be “the most dangerous” for China’s fight against Covid, analysts at Capital Economics have said.
“With migration to rural areas before the start of the lunar new year, any parts of the country that are not currently in a major Covid wave are likely to be soon,” they said.
“That will further depress production.”
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