January 27, 2023

Brighton Journal

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China’s economy is slowing down

China's economy is slowing down

The Caixin Purchasing Managers’ Index, a closely watched indicator for assessing the state of the economy, fell to 36.2 in April from 42 in March, according to a survey published by IHS Markit on Thursday. A reading below 50 indicates contraction, while anything above this scale shows expansion.

The service sector accounts for more than half of the state’s GDP and more than 40% of employment. And with survey data showing China’s manufacturing sector contracting last month, the world’s second-largest economy bounced back in April.

While conditions may improve this month as Covid infection rates drop and officials try to limit the damage to the economy, large parts of Beijing have just been put under stricter restrictions and some economists are now predicting that Chinese GDP will decline in the second quarter. .

The nation’s capital On Wednesday, local authorities announced that their largest district, Chaoyang District, had effectively closed down, suspended transportation within it and encouraged 3.5 million residents to work from home as part of their latest efforts to curb Covid-19 cases.
Services activity decreased by 6 points in April It was second only to the collapse in February 2020, when China’s economy Almost reached a dead end As it was struggling to contain the initial coronavirus outbreak started from Wuhan. That month, the Caixin Services PMI fell to 26.5 from 51.8 in January.

Companies in the world’s second-largest economy were already struggling with rising energy and raw materials costs, when the Covid lockdowns further hampered their operations.

It has also become more difficult for companies to pass the higher prices on to consumers, due to the impact of Covid restrictions on customer demand. This has translated into less employment.

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“Some companies, affected by the drop in orders, have laid off workers to cut costs,” Wang said. The service sector employment measure has been below 50 for four consecutive monthsAnd Show scan.

The data came just hours after China announced a sharp drop in tourism spending to mark National Labor Day.

Tourism spending was only 64.7 billion yuan ($9.8 billion) during the five-day holiday, down 43% from the same period last year, according to a statement issued by the Ministry of Culture and Tourism late Wednesday.

People made 160 million domestic tourist trips during the holiday, down 30% from the previous year.

The data once again highlights how China’s non-proliferation policy has taken a heavy toll on its economy.

On Saturday, the government’s PMI surveys indicated these two Factory and non-manufacturing activities fell in April to their worst levels since February 2020.

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“Recent mobility trends indicate that China’s growth momentum deteriorated significantly in April,” analysts from Fitch Ratings wrote on Tuesday. They expect GDP to contract in the second quarter before production recovers in the second half.

Nomura analysts also warned last month of increased “recession” risks in the second quarter, as the shutdown, a contraction in the real estate sector and a slowdown in exports hit the economy hard.

As the highly contagious Omicron variant spreads rapidly in China, the country is battling its worst outbreak in more than two years. So far, at least 27 Chinese cities are under complete or partial lockdown, which could affect up to 185 million residents across the country, according to CNN’s latest calculations.

It includes Shanghai – The country’s leading financial center and major manufacturing and shipping hub. The city has been under lockdown since March 28. And although authorities began lifting some restrictions last month, more than 8 million residents are still prohibited from leaving their apartment complexes.

The Chinese government remains committed to its strict “zero-Covid” policy more than two years after the initial outbreak – while the rest of the world learns to live with Covid. The policy includes mandatory mass testing and strict lockdowns to contain the spread of the virus.

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But the economic costs are rising.

Many economists have lowered China’s GDP growth targets for this year, citing the risks posed by the zero-Covid policy. Last month, the International Monetary Fund cut its growth forecast for China to 4.4%, well below the government’s official target About 5.5%.
In recent days, Chinese leaders have repeatedly tried to reassure the public about reforming the economy. President Xi Jinping called last week Infrastructure spending spree to promote growth. The Communist Party Politburo on Friday promised “specific measures” to Support the Internet economy.