In China some shutdown measures have already been eased. Does that mean its economy will rebound to the a priori position soon? If so, then perhaps westerners can stop worrying about deep recession because all we need to do it copy the Chinese anti-Covid programme and get going again.
Other models to follow are Singapore, South Korea, Japan and Hong Kong which have done a relatively good job of containing the virus. Does this mean that their economies will suffer little damage and get back to normal soon?
Today I’ll look at how these countries are faring.
There is some good news to report: the official rate of infections has slowed dramatically, as has the death rate – see chart.
China went through a period when it was operating at only 60% of normal economic output. Since then GDP has risen as reflected in purchasing managers indices, which indicate that there are more factories and service companies open for business in March than in February. We can see the improvement in some statistics. For example, congestion in major cities is now only 25% down on its 2019 rather than the 60% drop in February.
But note: people may be more willing to get in their cars, but they are still very reluctant to ride the subways, which are down 50% on normal, despite government shutdowns being eased and the Communist Party desperately encouraging people to return to work. Also families will still not mix with others in cinemas.
And they are buying 25% less property than they did in a typical day in 2019.
Heat and electricity are still required in households, but overall demand for coal is still significantly less than in 2019, presumably because many factories are drawing electricity from the grid.
Economic activity, as proxied by intensity of light in industrial parks, is still around 25% down on 2019.
We can conclude from the above, firstly, that China is nowhere near back to normal, and second, that it is looking its first recession since 1976.
“The real unemployment rate in China is likely to go higher than 10% for sure,” said Diana Choyleva, chief economist at Enodo Economics in London. “Q2 [economic activity] is shaping up to be very weak as disruptions to production in China linger and, more importantly, demand from the rest of the world evaporates.”
Last week a team of ANZ economists projected that China’s first quarter GDP would fall 9.4% YoY, with another annual decline up to 2.1% possible for the second quarter.
But China have opened up Wuhan and other Coroaavirus hotspots haven’t they? So it’ll get back to normal soon, surely?
The prospect of China getting rid of restrictions
Yesterday, health authorities reported 62 new coronavirus cases (in Shandong and Guangdong). As a result of regular out-breaks China has imposed strict rules on who can enter the country and enforces quarantine measures in a bid to prevent a wave of imported infections.
When relaxation of lockdown occurs people fear a second wave of infections as exemplified by Wuhan’s lifting its official ban on travel today,
“But for many of Wuhan’s 11m residents, the formal lifting of restrictions on movement is just the start of a long recovery for a city in severe economic distress and a population fearful of a second outbreak. Activity has picked up on the streets of Wuhan but many businesses remain shut. Scores of residential districts around the city are still sealed off, barring free movement. Many people
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Prof. Glen Arnold
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