For one, nearly 60% of European businesses in the country said they were cutting 2022 revenue projections as a result of Covid controls, according to a survey late last month by the EU Chamber of Commerce in China. More than half of those cuts were by 6% to 15%, the chamber said Thursday.
Among Chinese businesses, monthly surveys released in the last week showed sentiment among manufacturing and service businesses fell in April to the lowest since the initial shock of the pandemic in February 2020. Official and third-party versions of the survey, known as the purchasing managers’ index, pointed to further contraction in business activity from March.
The Caixin services PMI out Thursday was the latest release, with a drop to 36.2 in April. That’s far below the 50 line that indicates contraction or expansion.
Expectations for future output did improve slightly, a press release said. But there were “some concerns over how long it may take to fully contain the virus and to return to more normal business conditions.”Other data depict a similarly broad impact from Covid restrictions in China.
Power generation rose in the first two months of the year, but slowed to zero growth in March, according to figures cited by Larry Hu, chief China economist at Macquarie. He expects a drop in power generation in April.
In the massive real estate sector, Hu noted that lockdowns also make it “physically impossible to buy property,” sending sales in the top 30 cities down 54% in April from a year ago.On the consumer front, companies like Starbucks are reporting a widespread impact from Covid.
In the quarter ended April 3, the coffee giant said 72% of the 225 Chinese cities it operates in experienced omicron outbreaks. The company has more than 5,600 stores spread across eastern and central China, its second-largest market.
“With this more infectious variant, mobility restrictions and lockdowns are imposed faster and relaxed more cautiously,” Starbucks’ China chairperson Belinda Wong said in an earnings call. She noted that most of the stores still able to operate do so under “strict safety protocols that interfere with our traffic and operations.”
Starbucks said as of Tuesday, a third of its stores remain temporarily closed, or only offer delivery or takeout. The company has suspended guidance for the rest of its fiscal year.Since March, mainland China has faced its worst Covid outbreak since early 2020 — using the same zero-Covid strategy of swift lockdowns that had helped the country quickly return to growth back then. Manufacturing areas from the northern province of Jilin to the southern city of Shenzhen were among those initially forced to lock down.
However, the length of restrictions has varied greatly by region. Shanghai, China’s largest city, essentially remained locked down for all of April. The capital city of Beijing began tightening travel and business restrictions toward the end the month to control a spike in Covid cases.
With China’s two largest cities by GDP under Covid controls for the five-day holiday that ended Wednesday, national tourism revenue for the period only recovered to 64.68 billion yuan ($9.95 billion) — 44% of pre-pandemic levels, official figures showed.
“During lockdowns, residents only consume daily necessities, so consumption will inevitably slump, not to mention that price could easily triple during city-level lockdowns,” said Yue Su, principal economist at The Economist Intelligence Unit.
“Lack of confidence in the private sector will drag investment and employment, which will take a much longer period of time to restore even if China introduces more stimulus,” she said.China reported better-than-expected first quarter GDP growth of 4.8% from a year ago. But retail sales fell in March, while unemployment in the country’s biggest cities set a new high for the pandemic so far.