China rebound sign of post-pandemic hope

Right now, though, increased coal burning means something good at least for economists as it is a rather reliable indicator that China’s economic activities are picking up again, following weeks of virtual lockdown due to the coronavirus outbreak.

Citing figures from the China Coal Transport & Distribution Association, Bloomberg reported that coal use by five major Chinese coastal power plants reached 488,800 tonnes last week — that’s twice as much as the recorded low on February 10 at the height of the country’s lockdown. The increased use of coal comes as many factories have restarted and need more electricity.

Consultancy IHS Markit noted that more than 90% of markets, shops and malls and 70% of small- and medium-sized enterprises in China had reopened by mid-March as the country was fighting its way back to economic normality.

Given Chinese efforts to reboot production after the virus-related shutdown, it wasn’t that much of a surprise to see the latest Purchasing Managers’ Index (PMI) for the country regain some lost ground. But the index, which was published on Tuesday, came in well above expectations, hitting 52.0 for March, with the figure being provided by China’s National Bureau of Statistics (NBS). That’s way above the 35.7 recorded a month earlier and also way above the 44.8 forecast by economists.

Rajiv Biswas, APAC chief economist at IHS Markit, said, “The key factor supporting an improving outlook for China during Q2 2020 and the second half of the year is that the number of new COVID-19 cases has fallen to very small numbers each day, which has allowed factories to resume operating in closer-to-normal conditions while the lockdown on households has been significantly relaxed, allowing consumers to resume spending in stores and restaurants.” China’s NBS is striking a cautious note in analysing its own data.

“(The result) does not represent that our country’s economic operations have returned to normal levels,” the office commented, adding that “there remains relatively large pressure on enterprises’ production.” NBS officials warned that many Chinese firms coming out of the lockdown have been facing tight funding. But the far bigger worry is an even steeper slump in demand as COVID-19 sends shockwaves through virtually all of the Asian nation’s trading partners. Analysts agree that the nation will face a global demand shock in April as more nations send their own economies into lockdown

But even when the virus-induced crisis is over globally, the Chinese economy is likely to be confronted with an older problem that’s been off the radar temporarily. There are no indications whatsoever that the technology and trade conflict with the US will be buried once and for all. That menace — plus the long-term fallout from COVID-19 — endanger China’s growth targets. On Tuesday, the World Bank warned the nation could suffer a serious slump this year, meaning that growth could be down to 2.3% from 6.1% in 2019. 

Consequently, some analysts argued it would be better for the Chinese central bank not to set a growth target for this year at all so as not to hinder adequate policy measures to keep people safe.