China’s Economy Is Getting Back to Work After Virus Shutdowns
China’s economy was likely running at just 40%-50% capacity last week, according to a Bloomberg Economics report.
(Bloomberg) -- China’s economy is beginning to revive, as the government signals progress in battling the coronavirus outbreak that has killed more than 3,100 people and sickened tens of thousands at home.
Government controls and the fear of going outside have curtailed consumer spending, and many factories are still not working at full capacity due to clogged logistics systems, a lack of staff, or limited supplies and raw materials.
The economy was likely running at 70% to 80% capacity last week, according to a Bloomberg Economics report, while China International Capital Corp estimated it was at about 76% as of March 8.
The following data track how much of the world’s second-largest economy remains out of action.
Industrial Demand
Demand for coal to make electricity was the highest it’s been since Jan. 21 on Monday, but it’s still about 20% below where it was this time last year or in 2018. Along with anecdotal reports from across China’s vast east-coast manufacturing heartland, the power numbers suggest much of the nation’s industrial capacity is running at less than full capacity or is still idle.
That rise in electricity demand may not be a perfect indicator of increasing production. Some cities have given businesses targets for energy consumption because the government is using electricity data to show a resurgence in output. That prompted some firms to run machinery even though the plant was empty and not producing anything, according to people familiar with the matter.
However emissions of pollution from industrial activity confirm the same trend as electricity output -- down after the Lunar New Year and then slowly recovering, according to the Centre for Research on Energy and Clean Air, which cited satellite data.
In a survey of over 150 American companies in China in mid-February, only about 18% said they would be back to normal by the end of last month, with another 28% expecting that would happen by the end of March.
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The slowdown of refineries and dropping demand has led to larger stockpiles of crude oil.
Imports of liquefied natural gas had shown signs of life and rebounded in late February, but dropped off again last week as the market is oversupplied, with storage full and demand weak.
Imports of LNG will remain weak in March and April as industrial gas consumption has fallen sharply due to the coronavirus outbreak, Shanghai Petroleum & Natural Gas Exchange said Monday on its official WeChat account.
Moving Goods and People
About the same number of trips by planes, trains, automobiles and boats were taken in the run up to the Lunar New Year this year compared to last year, but the fall off since the first day of the Year of the Rat on Jan. 25 was stark.
About 78 million migrant workers have returned to work, which is about 60% of those who went back home for lunar new year, an official at the Ministry of Human Resources and Social Security said at a press conference on March 7. Almost all workers will have returned by early April, a transport ministry official said at the same event.
China’s largest private employer, which makes iPhones and many other electronic devices, said last week it would be operating normally by the end of this month, after resolving severe labor shortages brought on by the outbreak.
Note: Economists at Australia and New Zealand Banking Group, Nomura Holdings and Goldman Sachs Group are among those that have referred to some of these indicators in recent research. Bloomberg News will update this item as the situation continues to involve, adding data as it becomes available.
--With assistance from Feifei Shen, Jasmine Ng, Shirley Zhao, Aaron Clark, Yinan Zhao, Masatsugu Horie, Matt Turner, Serene Cheong and Stephen Stapczynski.
To contact Bloomberg News staff for this story: James Mayger in Beijing at jmayger@bloomberg.net;Lin Zhu in Beijing at lzhu243@bloomberg.net
To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, James Mayger
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With assistance from Bloomberg