Beijing-China is the place where the coronavirus pandemic started in December and is cautiously trying to restart business, but this is not easy when thousands of workers are wary of spending a lot of money or even going out.
Factories and shops across the country have been closed since late January. Millions of families have been told to stay at home under unprecedented control, which has been replicated in the United States, Europe and India.
The ruling Communist Party stated that the epidemic has been brought under control. The outbreak had killed more than 3340 of the 82,341 confirmed cases as of Thursday. However, the damage to the lives and economy of the Chinese people continues.
Zhang Hu, a truck salesman, is in a dilemma hindering recovery. The 27-year-old man from the central city of Zhengzhou has returned to work, but since few people plan to buy a 20-ton truck, his income has dropped by half. Like millions of other people, he is squeezing money.
He said: “I postponed the car change plan and hardly spent any money on dining out or entertainment.” “I don’t know when the situation will get better.”
After President Xi Jinping visited Wuhan, the epicenter of the outbreak, the factory reopened in March, indicating that the virus was under control. However, those consumers whose consumption drives China’s economic growth are still afraid of losing their jobs or contracting the virus. Despite official efforts to lure them back to shopping centers and car showrooms, they still insist on their money.
The data released on Friday are expected to show that the economy contracted by 9% from January to March, the worst performance since the late 1970s.
This is a blow to automakers and other global companies. They hope that after leading the global shutdown of China, it is possible to recover from the most painful downturn since the Great Depression in the 1930s.
Louis Cuis of the Oxford Economics Institute said: “The demand has not been fully recovered, or is completely gone.”
In Europe, as shoppers stay away from the few stores that are reopening, and some workers worry that the newly restored freedom may jeopardize their health, in Europe, initial attempts to lift severely paralyzed restrictions have also met resistance. . Although restrictions were relaxed this week and some businesses were able to reopen, the streets of Rome were still empty.
In China, when families stay at home to buy groceries and other items, e-commerce is boosted. But forecasters predict that total spending on clothing, food and other consumer goods will barely increase this year.
Some cities have adopted the method of issuing shopping vouchers and reassure consumers by showing official media how officials eat in restaurants. Compared with the United States and other high-income countries, the share of consumption in the Chinese economy is relatively small, but it accounted for 80% of the growth last year.
Economists had previously predicted that China would rebound as early as this month. After January-February activity was even worse than expected, they lowered their economic growth forecast and postponed the recovery schedule.
Bernstein Research said that car sales could fall by as much as 15%, deepening the two-year recession in the world’s largest market in the automotive industry.
Due to factory closures, about 800 million people were required to stay at home, consumer spending fell by 23.7% from the same period last year, and manufacturing fell by 13.5%. Car sales plunged 82% in February. The forecast for China’s annual economic growth was close to 6% before, but it is now as low as zero.
This dragged down the global growth forecast. According to the International Monetary Fund, the world economy may shrink by as much as 3%, much higher than the 0.1% loss during the global financial crisis in 2009.
Morgan Stanley said that other Asian countries are more vulnerable to global trade shocks, are unlikely to experience a rapid recovery, and may follow the West into recession.
In China, the manufacturing industry has returned to 80% of the normal level, but urban transportation, electricity use and other daily life indicators are half to 65% of the normal level.
At the same time, the new outbreak caused more control measures to cause public anxiety.
An employee said that a furniture manufacturer in northeastern Shenyang reopened on March 15, but there were few visitors to the showroom. He only gave him the last name Jin.
33-year-old Jin said: “Due to epidemics and unemployment, no one wants to renovate houses and buy furniture.” He said that he and his wife cancelled plans to buy cars and travel.
In order to attract shoppers, Jinan City in the Northeast region and Ningbo City in the south of Shanghai are all issuing coupons. The eastern city of Nanjing issued 318 million yuan (45 million U.S. dollars) electronic vouchers through smartphones for consumption in restaurants, bookstores and other businesses.
The southern region, including Jiangxi Province, extended the weekend to 2 1/2 days and lowered the ticket prices for local scenic spots.
The ruling party has notified the company to continue paying wages to avoid layoffs. Although the official media said that the bureaucracy is slowing the flow of aid, it has promised private companies tax cuts, low-interest loans and other help.
It is not clear how many companies will be permanently closed under pressure to pay rent and wages without rent.
Zuo Xiaolei, an economist at Beijing Galaxy Securities, said: “Due to the reduction in domestic and foreign orders, the company cannot resume full production, so they are reluctant to hire workers.” “If workers have no income, then consumption will fall.”
Kuys of the Oxford School of Economics said that the effective strategy after the 2008 crisis was Germany’s “short-term work.” Employees’ working hours have been reduced, but the company has received government subsidies to pay full-time wages. This keeps experienced workers on site and supports consumer spending.
China’s exporters of consumer electronics, clothing and other goods are unlikely to receive much help from abroad, because the United States and Europe have suffered waves of unemployment and require consumers to stay at home.
Larry Hu of Macquarie Capital stated in a report: “It is easy for exports to fall by 10% or more by 2020.
Chinese leaders are investing more on roads, other public works and next-generation telecommunications networks, but they are unwilling to inject too much money into the economy because they are worried that they will increase inflation and increase large amounts of debt.
Hu said: “It makes no sense to stimulate too much at this stage.” “This will lead to more inflation, not more output.”