China’s economy is rebounding. But a recent mini-outbreak of coronavirus cases in Beijing, all of them connected to a meat and fish market so far, could block them from finally scoring a win against the new SARS.
Their domestic economy has been recovering since March, thanks to the easing of strict quarantine measures and continued policy support. Total credit growth rebounded to 12.5% in May, the highest level since June 2017, while local government bond issuance jumped to a record 1.3 trillion yuan ($183 billion).
Two of China’s most beat down sectors — automotive and real estate — are on the mend. There’s been an improvement in both auto sales, and in the housing market.
The real output growth of services production, which closely tracks China’s GDP growth, registered positive year-over-year growth of 1% last month, despite cinemas staying closed and tourism banned across state lines.
“The recovery in production has continued to outpace that of demand,” says Bo Zhuang, China economist for TS Lombard. “There have been no mass manufacturing lay-offs. There’s been better-than-expected export growth in April and May, and labor markets held up more strongly than we had expected,” he says.
TS Lombard has China GDP growing at 1% in the second quarter compared to a year ago and 2% in 2020, its lowest in a generation.
The most immediate concern is a viral resurgence in Beijing.
Beijing never really had a first wave, ending the winter with well under 1,000 cases and 9 deaths, according to data compiled by Johns Hopkins University.
A recent uptick in Covid-19 cases in Beijing linked to the Xinfadi fruit and vegetable market since last Thursday does raise the threat of wider lockdowns in the city, the home of the Chinese Communist Party.