Covid-19 drops consumption in China and increases unemployment

With consumption at its lowest point and unemployment on the rise, China on Monday revealed its worst economic indicators in two years, as the country faces the most serious outbreak of Covid-19 since the first wave of the disease in 2020.

The strict policy to combat the virus imposed by the government weighs on displacement, consumption and supply networks.

Shanghai, the economic capital of the country, with 25 million inhabitants, has been in lockdown since April, although the deputy mayor announced on Sunday a phased reopening of shops.

At the same time, Beijing reinforces anti-Covid measures after registering an increase in contagions.

Retail sales, the main indicator of household spending, fell by 11.1% year-on-year in April, announced the ONE (National Bureau of Statistics).

This is the second consecutive month of decline in the index (-3.5% in March).

At the same time, the unemployment rate, closely monitored by the government, rose from 5.8% in March to 6.1% in April, close to the record level recorded in February 2020, during the toughest months of the first wave of unemployment. Covid.

The index, however, presents a partial picture of the situation because in China unemployment is calculated among the urban population and excludes millions of migrant workers, who are particularly vulnerable.

“Sizable Impact”

On Friday (13), the government announced measures for companies to hire more young employees. A large number of recent graduates are expected to enter the job market this year.

Authorities also asked public companies for help, the official Xinhua news agency reported.

For the Chinese government, the goal in 2022 is to create almost 11 million jobs, a number that represents a drop compared to last year (12.69 million). But this criterion reveals no clues about the number of jobs lost to the health crisis.

At the same time, industrial production fell 2.9% year-on-year in April, down from 5% in March.

Shanghai’s lockdown damages supply chains.

The port city is one of the largest entry and exit points for goods in China. The confinement has “a considerable impact” that “threatens” world trade, warns economist Raymond Yeung, from the ANZ bank.

Short term?

The impact of Covid on activity will be “short-term”, said ONS spokesman Fu Linghui, in an attempt to calm tempers. He believes in an economic recovery soon.

But the anti-Covid measures pose a risk to the 5.5% growth target set by Beijing. The year is crucial as President Xi Jinping is set to be re-elected as head of state of the world’s second-largest economy.

Many economists doubt that the country will be able to meet the goal, which would be China’s lowest growth since 1990, without considering 2020, the year the pandemic began.

“The stability of the economy is not just an economic issue, it is also a matter of social stability,” Chinese Premier Li Keqiang warned in a speech widely reported by local media on Saturday.

“For this reason, the government must accelerate stimulus measures”, warns consultancy Gavekal Dragonomics.

To support growth, Beijing on Sunday slashed mortgage interest rates for first-time homebuyers.

The real estate and construction sectors, which account for more than 25% of China’s GDP, played a key role in the economic recovery in 2020 after the first wave of the pandemic.

But these sectors also suffer from restrictive measures. In April, home sales fell 39% year-on-year, according to the ONS.

China stocks end lower on weak data from extreme economic activity

China stocks ended lower on Monday after data showed the country’s economic activity cooled sharply in April due to Covid-19 lockdowns, with investors scrapping Shanghai’s reopening plan in June. and a loan rate cut for first-time homebuyers.

The CSI300 index, which brings together the largest companies listed in Shanghai and Shenzhen, dropped 0.8% on the day, while the Shanghai index lost 0.34%.

The Hong Kong Hang Seng Index rose 0.26%, while the China Enterprises Index gained 0.3%.

. In TOKYO, the Nikkei index rose 0.45% to 26,547 points.

. In HONG KONG, the HANG SENG index rose 0.26% to 19,950 points.

. In SHANGHAI, the SSEC index lost 0.34% to 3,073 points.

. The CSI300 index, which brings together the largest companies listed in SHANGHAI and SHENZHEN, dropped 0.80% to 3,956 points.

. In SEOUL, the KOSPI index fell by 0.29% to 2,596 points.

. In TAIWAN, the TAIEX index rose 0.43% to 15,901 points.

. In SINGAPORE, the STRAITS TIMES index remained closed.

. On SYDNEY, the S&P/ASX 200 index rose 0.25% to 7,093 points