With China on the move again, the economic outlook has brightened

BEIJING: Chinese residents are increasingly on the move after the country’s sudden reversal last month of heavy COVID-19 restrictions despite a surge in infections, pointing to a gradual recovery in consumption and economic activity this year.

Mobility and spending data – from subway ridership in three of China’s biggest cities to flight volumes to ticket collections – have been on the rise since late December after Beijing abruptly ended three years of a “zero COVID” policy earlier this month in the month.

However, some indicators show that activity has not fully recovered to levels just a few months ago, and many economists remain cautious about the pace of recovery after the faster-than-expected reopening.

“The decline in retail spending is increasingly broad-based, suggesting it will take time to reverse the negative psychological impact on Chinese consumers caused by three years of episodic lockdowns,” said Louise Loo, senior economist at Oxford Economics.

Lockdowns and restrictions related to COVID-19 hit the travel, cinema and car market last spring and again in the early winter, data from information providers and industry bodies showed.

In addition, Loo said a rapid recovery is also being hampered by changes in household liquidity positions during the pandemic.

“Unlike the immediate cash repayment programs seen in Hong Kong and Singapore that go some way to supporting household spending, China’s COVID-19 relief programs have mainly focused on supporting businesses affected by the lockdown,” he said.

Policymakers have promised to boost demand this year, especially consumption.

But spending in other major economies has missed the lift due to rising interest rates aimed at reducing inflation, which has hit China’s exports, which have been a rare bright spot for its economy during the pandemic.

An official survey of factory activity showed an indicator of new export orders remained in contraction territory for 20 consecutive months. The number fell to 44.2 in December from 46.7 in November. The 50-point mark separates contraction from growth on a monthly basis.

Employment in the massive manufacturing sector is also under pressure, according to the survey, likely due to low production levels and labor supply difficulties amid virus outbreaks, analysts said.

Economists expect the world’s second-largest economy to recover from the second quarter, supported by stronger consumption and increased government spending on infrastructure projects. But a recovery in the country’s real estate market could take much longer.



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