China’s factory activity picks up as anti-virus restrictions ease

• The data suggest a “lockdown recovery got underway across most parts of the economy,” said Sheana Yue of Capital Economics in a report.
• Export growth, reported last week, accelerated to 16.9% in May from the previous month’s 3.7%. Import growth rose to 4.1% from April’s 0.7%.

China’s factory output increased in May, contributing to the country’s recovery from the current economic slump caused by COVID-19 limitations.

China’s factory output increased in May, contributing to the country’s recovery from the latest COVID-induced economic collapse, following the relaxation of regulations that had shut down Shanghai and other industrial areas.

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According to government figures, industrial production increased 0.7 percent year on year, recovering from a 2.9 percent decline in April. Consumer expenditure increased slightly in May but was lower than a year earlier.

The data suggest a “lockdown recovery got underway across most parts of the economy,” said Sheana Yue of Capital Economics in a report.

Although the number of cases in China’s latest wave of infections is low, the ruling Communist Party’s “zero-COVID” strategy, which aims to isolate every person infected with the virus, shut down most businesses in Shanghai beginning in late March and suspended access or imposed other restrictions in other industrial cities. This fuelled concerns that global production and trade would be disrupted.

Most factories, stores, and other enterprises in Shanghai, Beijing, and other cities have been allowed to reopen, but normal operations are expected to take weeks or months.

Economists predict China’s growth this year would be as low as 2%, significantly below the 5.5 percent objective set by the ruling Communist Party. Some predict that activity will decline in the June quarter before gradually improving.

Consumer expenditure gained 0.05 percent in May compared to the previous month but was down 6.7 percent year on year due to concerns about the economy’s prospects and potential job losses. Compared to April, investment in factories, real estate, and other fixed assets increased by 0.7 percent.

Chinese policymakers have given tax breaks, free rent, and other assistance to firms in order to help them recover.

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“Following all this weak data, we should expect the government to respond with more fiscal stimulus,” said Iris Pang of ING in a report.

Export growth, reported last week, accelerated to 16.9% in May from the previous month’s 3.7%. Import growth rose to 4.1% from April’s 0.7%.