Coronavirus: Beijing outbreak ramps up pressure on China’s economic momentum
- Beijing’s rush to contain an outbreak with mass testing and tough restrictions is putting further strain on China’s economic growth momentum
- Activity in both China’s manufacturing and services sectors fell to its lowest point in more than two years last month, data released on Saturday showed
China’s economy is expected to take a further hit as authorities in Beijing rush to contain a coronavirus outbreak with mass testing and tough restrictions that have left streets and shops empty in the capital during the five-day Labour Day holiday.
“We are of the view that the ongoing pandemic remains the major headwind as balancing Covid-19 suppression weighs on China’s growth momentum due to the stoppages of consumption and production,” said Banny Lam, head of research at CEB International, on Tuesday.
Beijing residents have been encouraged to stay at home during the Labour Day holiday, which began on Saturday.
At the Viva shopping centre, located in a large residential area near Beijing’s central business district, few customers could be seen on Sunday morning.
“It’s mostly us,” said a sales assistant at the BLT supermarket, an upmarket imported goods retailer under the state-owned China Resources Vanguard.
“We don’t expect a lot of customers [during the Labour Day holiday]. It’s just safer for them to stay at home now.”
At Le Petit Pain, a cafe near the shopping centre, dining services had been suspended.
“It’s not great for us, we are only a small cafe, although we can still offer delivery for now,” said an assistant. “But we don’t expect a lot of online orders for our espresso.”
To visit public parks or shops during the Labour Day holiday, residents are required to show a negative result from a PCR test within 48 hours.
Starting Thursday, residents will be required to show a negative PCR test result within seven days to use public transport.
“To sum up, the impact of the epidemic on the economy is still ongoing,” said Haitong Securities on Saturday.
“Small enterprises continue to be weak and the impact on large companies has begun to appear. In April, large enterprises fell into the contraction range for the first time since the Wuhan outbreak [in 2020].”
The official manufacturing PMI fell to 47.4, from 49.5 in March, which was also the lowest reading since February 2020.
Many companies have had to halt production as a result of China’s Covid-19 control measures, while construction, a go-to tool used by Beijing to steady economic growth, has also taken a hit.
“The employment index in the construction industry in April was 43.1 per cent, a decrease of 7 percentage points from March,” said Haitong Securities.
High-frequency data has also shown that the rate of cement shipments and the volume of construction steel transactions fell significantly in April compared to the same month in recent years, Haitong Securities said.
On Friday, the 25-member Politburo, the centre of power within the Communist Party headed by President Xi Jinping, vowed to speed up delivery of tax cuts and support policies.