China: Country’s economy regresses continuously

As a result of Covid lockdowns, China’s massive services industry just contracted at the second-fastest rate on record.

According to a survey released by an international publication on Thursday, the Caixin purchasing managers’ index, a frequently monitored barometer for measuring the status of the economy, fell to 36.2 in April from 42 in March.

Anything less than 50 suggests contraction, whereas anything more than that indicates expansion.

The services industry employs over 40% of the workforce and accounts for more than half of the country’s GDP.

China’s manufacturing sector shrank last month, according to survey data, and the world’s second largest economy regressed in April.

While situations may improve this month as Covid infection rates reduce and regulators attempt to limit economic damage, vast portions of Beijing have recently been placed under stricter restrictions, and some experts are now predicting a drop in Chinese GDP in the second quarter.

As part of its newest effort to combat Covid-19 instances, the nation’s capital has effectively shut down its largest district, Chaoyang, halting transit within it and encouraging 3.5 million citizens to work from home, local authorities stated on Wednesday.

In April, the nearly 6-point drop in services activity was second only to the collapse in February 2020, when China’s economy came to a halt as it tried to contain the initial coronavirus outbreak that began in Wuhan.

The Caixin services PMI fell to 26.5 in February from 51.8 in January.

Covid lockdowns significantly hampered the operations of businesses in the world’s second largest economy, which were already dealing with increased energy and raw material costs.

Because of the impact of Covid limits on customer demand, it has become more difficult for businesses to pass on higher prices to consumers. This has resulted in even lower employment levels.

“Affected by the reduction in orders, some companies fired off workers to cut expenses,” Wang added.

According to the poll, the employment measure in the services sector has been below 50 for four months in a row.

The figures were released just hours after China reported a significant reduction in tourist spending during the national holiday of Labor Day.

According to a statement released by the Ministry of Culture and Tourism late Wednesday, tourist expenditure was only 64.7 billion Yuan ($9.8 billion) for the five-day holiday, down 43 percent from the same period last year.

During the holiday season, 160 million domestic tourist excursions were conducted, down 30% from the previous year.

The data demonstrates how China’s zero-Covid policy has put a toll on the country’s economy.

According to government PMI surveys released on Saturday, factory and non-manufacturing activity in April fell to their lowest levels since February 2020.

Fitch Ratings analysts said on Tuesday that “recent mobility data show that China’s growth momentum worsened markedly in April.”

They predict that GDP will fall in the second quarter before rebounding in the second half.

Last month, Nomura analysts warned of a rising danger of “recession” in the second quarter as the economy was hit hard by lockdowns, a weakening property sector, and falling exports.

China is seeing its biggest outbreak in more than two years as the highly transmissible Omicron form spreads swiftly.

According to the publication’s latest calculation, at least 27 Chinese cities are currently under complete or partial lockdown, affecting up to 185 million people across the country.

Shanghai, for example, is the country’s most important financial center as well as a major manufacturing and shipping hub.

Since March 28, the city has been under lockdown. Despite the fact that officials began to ease some restrictions last month, more than 8 million residents remain confined to their homes.

More than two years after the original epidemic, the Chinese government continues to enforce its strict zero-Covid policy, even as the rest of the world learns to live with Covid.

To stop the virus from spreading, the policy includes mandatory mass testing and severe lockdowns.

However, economic costs are increasing.

Many economists have lowered their GDP growth forecasts for China this year, citing dangers posed by the zero-Covid policy.

The International Monetary Fund cut its China growth prediction to 4.4 percent last month, significantly below the government’s official 5.5 percent aim.

Chinese policymakers have attempted to reassure the people about the economy in recent days.

Last week, President Xi Jinping called for a massive infrastructure investment splurge to boost GDP.

On Friday, the Politburo of the Communist Party announced “concrete steps” to boost the internet economy.