Coronavirus: China braced for second economic shock wave as Covid-19 controls kill demand

After riding out a supply shock that closed down most of its factories, China is bracing for a second wave demand shock to its economy

Closure of overseas markets to hit exports, while psychological scars, bankruptcy and job losses will hit domestic demand

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A form of the lockdown that paralysed China is now being replicated in many parts of the world, as countries try to get a handle on the rampant spread of a coronavirus pandemic. Illustration: Kaliz Lee

Published: 1:14pm, 23 Mar 2020Updated: 11:26pm, 23 Mar 2020

At the end of February, bosses of a Chinese industrial piping company were worried about the collapse of local orders, after a draconian lockdown of manufacturing and retail activity that hollowed out the world’s second largest economy.

Fast-forward less than a month, domestic orders are picking up and factories across China are humming at close to capacity. But Rifeng Enterprise Group now has new concerns.

A form of the lockdown that paralysed China is now being replicated in many parts of the world, as countries try to get a handle on the rampant spread of a coronavirus pandemic that is hacking at the lifeblood of the global economy.

“We’ve returned to 100 per cent capacity for overseas demand, but sadly the market is either shutting, or about to shut,” said Jason Cheng, general manager of Rifeng’s overseas business, adding clients in France, Italy and the United States have made requests to delay payments or cancel orders.

“We had a similar situation in 2008 and 2009, where overseas revenue was half of what it was in the previous year,” Cheng said. “A similar story is going to happen now, I am very sure.”

Many in China are now bracing for the second wave of economic fallout from the coronavirus pandemic, which crippled activity in the first two months of the year.

The initial supply shock left large swathes of China’s manufacturing engine idling, but economists are now more worried about a double-headed demand shock that is set to rock the economy further over the coming months.

With the quickly developing containment effort set to hit overseas demand, Chinese exports – accounting for 20 per cent of the economy – will suffer. Customs data showed that China’s exports already shrank by 17.2 per cent in January and February, with analysts warning worse may lie ahead.