Having been the first country to endure the ravages of Covid-19, China’s economic recovery appears to be underway, according to the latest government statistics at least.
The latest survey of Chinese purchasing managers (PMI) which monitors activity across a number of separate sectors bounced back from a record low of 28.9 in February to 53 in March. Such a rebound surprised most analysts and economists who had not predicted China to surpass the 50-point mark which signifies either a monthly growth or contraction.
With 81,518 officially confirmed cases and 3,305 deaths China suffered significantly as the novel coronavirus spread from its epicentre in Wuhan, Hubei province. The restrictive nationwide lockdowns enforced by the government helped arrest the pandemic but took a significant economic toll on the second-largest economy in the world.
President Xi Jinping has been keen to get the country back to work, not only for economic reasons but also to maintain social order. For the past two decades the ruling Communist Party of China has sought annual growth of at least 6 per cent and a low unemployment rate.
For the first time since the 1970s China is set to endure a quarter of economic contraction, while an estimated 8 million Chinese lost their jobs in February. The problem has proved so significant that Chinese Premier Li Kequiang this month stated that economic growth statistics are unimportant compared with restoring employment to pre-Covid levels.
On both counts however, Xi, Kequiang and the rest of the Central Politburo will be cheered by the latest PMI figures which indicate a recovery in both key sectors of China’s economy. Manufacturing PMI rose from 35.7 in the month before to 52 in March, while services PMI jumped from 29.6 to 52.3.
PMIs are still “soft data” which rely on the truthfulness of individual managers. Perhaps for this reason China’s National Bureau of Statistics has struck a cautionary tone, admitting that the figures: “reflects that more than half of the surveyed enterprises have resumed work and resumed production, better than last month, but it does not mean that China’s economic operation has returned to normal”.
Such caution may well be warranted. At the start of this week the People’s Bank of China (PBoC) cut its reverse repo rate to 2.20 per cent, its lowest on record and further injected 50bn yuan ($7bn, £5.7bn) into the economy. Such measures, coupled with news of growing credit card debt delinquency among individual Chinese citizens, indicate that China's economy is by no means in the clear.
The Shanghai Composite Index (SCHOMP) closed up a marginal 0.11 per cent in Tuesday trading at 2,750.30.