New coronavirus outbreaks in China’s rust belt spark fears for struggling provincial economies

Clusters of new coronavirus cases have sprung up in the provinces of Heilongjiang, Jilin and Liaoning, emphasising the risk facing the wider Chinese economy

Heilongjiang and Liaoning contracted by 8.3 per cent and 7.7 per cent respectively in the first quarter of 2020, the third and fourth worst among all China’s 31 provinces

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New pockets of coronavirus cases have raised fears over the economic health of some of China’s rust belt provinces - once the pride and birthplace of China’s industrial development Photo: Xinhua

Published: 8:15am, 14 May 2020Updated: 8:19am, 14 May 2020

New lockdowns imposed to contain coronavirus outbreaks in China’s north-easterly rust belt region have sparked fears for the economic well-being of some of the country’s poorest provinces.

Clusters of new coronavirus cases have sprang up in the provinces of Heilongjiang, Jilin and Liaoning, emphasising the risk facing the wider Chinese economy as Beijing continues its efforts to kick-start the US$14 trillion juggernaut after nationwide shutdowns in the early months of the year.

The spate of new cases also offer a potential lesson for other parts of the world, which are starting to reopen their economies despite public health experts warning against relaxing containment measures too early.

Already, all three provinces were among China’s worst performing economies of 2020 and while Liaoning is a mid-ranked provincial economy, Heilongjiang and Jilin are among the country’s poorest.

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Heilongjiang and Liaoning contracted by 8.3 per cent and 7.7 per cent respectively in the first quarter of this year, the third and fourth worst performance among all China’s 31 provinces. Jilin fared a little better than its two neighbours, but still shrunk by 6.6 per cent, according to government data, slightly ahead of the nationwide contraction of 6.8 per cent.

Profits of industrial companies in the three northeastern provinces – once the pride and birthplace of China’s industrial development – dropped by 63 per cent from a year ago in the first three months of the year, while regional retail sales fell by 29 per cent and per capita consumer spending fell by 11 per cent, calculations based on government data showed.

“Economic growth in northeastern China has continued to weaken over recent years, and will get even worse under the impact of the epidemic,” wrote Ren Zeping, chief economist at the Evergrande Research Institute, a think-tank run by the major property developer of the same name, in a note.

Authorities in Jilin city, the second largest city in the province of the same name, enforced a partial lockdown on Wednesday, placing restrictions on transport and gatherings, after seven new cases were confirmed on Tuesday, bringing the total to 21 community cases in a week.