Slow recovery reported as China continues to fight Covid-19

China’s economy continued its recovery in October, although the growth rate was slight, according to figures for the country’s National Bureau of Statistics (NBS).

However, it also warned that with the global economic system being so volatile the foundation for the country’s economic recovery is not yet solid, the bureau said.

“China needs to coordinate coronavirus curbs with economic and social development in a more scientific and efficient way, expand market demand, and continue to stabilize employment and price levels,” the NBS said.

The data shows that some sectors, including advanced manufacturing and e-commerce, showed recovery signs in October. The added value of industrial enterprises (above a designated size) rose 5% year-on-year, which was 0.33 percentage points higher than September. The value-added of advanced manufacturing rose 10.6%, 1.3 percentage points faster than September.

The figures also show that the urban jobless rate stood at 5.5% in October, the same figure as in September. The consumer price index rose 2.1%; excluding food and energy prices, the core CPI rose just 0.6% from a year earlier.

From January to October, total retail sales grew 0.6% year-on-year. Online sales of physical goods rose 7.2%, some 26.2% of total retail sales.

Retail sales were recorded at 4.0271 trillion yuan ($572 billion) in October, down 0.5% year-on-year. Retail sales of commodities reached 3.6171 trillion yuan, up 0.5% year-on-year, while catering sector revenue’s slid 8.1% to 409.9 billion yuan. Retail sales of auto vehicles hit 369.5 billion yuan in October, up 3.9% year-on-year.

“Economic figures were largely in line with expectations. Online commodity transactions remained at a reasonable level, while services took a hit, indicating epidemic control measures had a significant impact on the sector,” Zheng Lei, chief economist at Samoyed Cloud Technology Group, told the Global Times website.

“As the country’s anti-epidemic measures are now optimized, there is room for consumption to pick up,” said Zheng.

 

Government responds to Covid outbreaks

Meanwhile, the Chinese government has announced 20 new measures designed to tackle recent coronavirus flare-ups. The measures will likely make epidemic response more targeted and science-based, according to the State Council, China’s cabinet.

“With the implementation of new policies to promote sales, it is expected that consumption will improve as the national economy gradually recovers and residents’ employment and income pick up,” Fu Linghui, a spokesperson for the NBS, told a press conference in Beijing.

“In the coming days, the impact of the Covid-19 epidemic will likely persist, but it could be short-term. There are more favourable conditions for us to see a consumption revival soon in China,” said Fu.

As part of the measures, the Chinese government has slightly eased its strict zero tolerance policy on Covid-19. Quarantine for close contacts has been cut from seven days in a state facility to five days, and three days at home, and officials will also stop recording secondary contacts, so many people will avoid having to quarantine.

Analysts said that the measures meant there was considerable room for the recovery and growth of consumption, which is a major driving force of economic growth.

Tian Yun, an economist based in Beijing, said: “I predict the growth of consumption will return to around 5% gradually. At the current stage, it looks that the real estate sector slowdown is a major drag on the economy.”

Tian added that he thought it would take a long time for the real estate sector to recover, which may not happen until China’s social and economic life fully returns to normal.

Economic growth should gradually recover to the level of 2019, said Tian.

But the NBS’ press conference noted some positive signs for the housing sector, analysts said. Since the beginning of this year, in the face of the adjustment of the real estate market, some blind expansion by the developers drives their capital chain relatively tight, Fu said.