China’s GDP data indicates heavy spending on its Zero Cove strategy

BEIJING – Faced with its worst Kovid-19 outbreak so far, China is increasingly enforcing mass quarantine, tightening lockdowns and border controls. Measures may still work, but official data released Monday shows they are charging a hefty toll on the world’s second-largest economy.

China’s economy expanded 4.8 percent in the first three months of this year compared to the same period last year. That pace was just as rapid as in the last three months of last year, and it also obscured a vague problem.

Most of that increase was recorded in January and February. Last month, economic activity slowed as the southern technology hub of Shenzhen and then the country’s largest city, Shanghai, and other important industrial centers closed. Lockdowns disrupted assembly lines, grounded workers, stranded truck drivers and ports. They have kept millions of customers under house arrest.

Retail sales, a key indicator of whether consumers are spending, fell 3.5 percent in March from a year earlier, the National Bureau of Statistics said Monday. Factory output grew 5 percent, a rate that was slower than the pace recorded in the first two months. Imports, which were ahead in the first two months of the year, declined slightly last month, partly due to transportation problems.

The slowdown, which began in March, is expected to worsen this month, with more territories subject to restrictions. This is bad news for Chinese leaders, who have set a target of “around 5.5” Percent “ Increase for the year.

Premier Li Keqiang a week ago called for a “sense of urgency” to tell local officials to limit the impact of the coveted shutdown on the economy. China’s central bank on Friday worked to help commercial banks lend more to boost economic growth.

For the world, China’s coveted shutdowns could feed inflation by further disrupting the supply chains that many manufacturers rely on, increasing the cost of product creation and transportation. A lazy China will import less from other countries, be it natural resources like oil and iron ore or consumer goods like cherries or designer handbags.

“When it comes to the impact of the epidemic outlook in Shanghai and Shenzhen, we must not forget that they are an important part of the entire supply chain and will certainly affect the entire Chinese economy,” said Yao Jingyuan, a former chief economist at the National Bureau of Statistics who is now cabinet adviser. , Said at a press conference last Wednesday.

Executives in the auto industry and technology sector, two of China’s largest employers, in Shanghai, in particular, have begun warning of disruptions in their countrywide operations in recent days if they do not reopen soon. The city produces many high-tech components that are important to many supply chains.

“Shanghai is a hub for international car companies – if the hub fails, the whole system will not work,” said Kui Dongshu, secretary general of the China Passenger Car Association, in a telephone interview.

As of April 11, 87 of China’s 100 largest cities had imposed some sort of curfew on the movement, according to Gavekal Dragonmix, an independent economic research firm that is tracking lockdowns. These range from restricting who can enter or leave a city like Shanghai to a complete lockdown, where most residents are not even allowed to leave their homes to buy food.

Yang Degang, manager of a plastic molding machine factory in Zhangjiagang, 70 miles from Shanghai, was forced to suspend operations on Wednesday after imposing a lockdown in his hometown.

Even before the lockdown, authorities imposed restrictions that restrict truck movement. This means that Mr. Young could not get the materials in time to build his machines and could not supply the finished equipment to many factories and ports in the lockdown.

Mr Young said he did not know when he would be able to reopen. “Zhangjiagang is under tremendous pressure,” he said. “I’m worried about the loss, but there’s no other way.”

But while more cities are imposing lockdowns – Taiwan, the center of China’s coal industry, was added to the list last Thursday – the severity of municipal lockdowns has weakened somewhat lately. According to Gavekal, from the end of March until last Wednesday, the number of major cities with severe lockdowns dropped from 14 to six. The share of China’s economic output, represented by these cities, has shrunk from 14 percent to 8 percent.

Beijing has instructed local governments to take other measures to allow trucks to reach their destinations and to protect the economy from damage during lockdowns. Neo, an electric car manufacturer in Hefei, central China, stopped car rallies on April 9. Hefei was not locked down, but important material suppliers were in Shanghai, Jilin and elsewhere. By last Thursday, the company had received enough car parts to resume limited production.

Many workers are also struggling. Truck drivers, for example, face the constant threat of weekly quarantine, for which they are often not paid even though their truck interest is outstanding.

Yu Yao, a truck driver who delivers vegetables and fruits from Shandong Province to Shanghai, is one of many Chinese truck drivers stranded due to tightening epidemic control. He has been detained in Shanghai for more than three weeks.

Mr Yu arrived in Shanghai on March 16 to deliver vegetables to a market. He was still in town three days later when authorities identified him as a close contact of an infected person in the market. Police ordered him to stay in quarantine immediately. So he stopped his truck near a highway and waited.

She has been waiting ever since. No one brought him for quarantine. He now lacks a travel permit to drive a truck in Shanghai during the lockdown. He and four other drivers slept on the ground without permission to travel and shared bread for three weeks.

“We can’t get off the highway, every exit is guarded. We just want to go home, ”said Mr. Yu. “I didn’t get enough food the other day, and my body can’t take it anymore.”

One sector of China’s economy continued to barrel in the first three months of this year: exports. Chinese factories accounted for a significant portion of the global market during the epidemic, with exports rising 14.7 percent in March from a year earlier. Many multinational companies continue to rely on a large network of parts suppliers in China.

But since China is disrupting production by imposing severe lockdowns without warning, at least some importers from the West have begun to look elsewhere for supplies. Jack Phipps, founder of Phipps & Co., an American importer and home furniture distributor who sells to hotel and apartment developers, says he has been removing many orders from China in the last two years.

He has started buying kitchen cabinets from Vietnam and Turkey, vinyl flooring from Vietnam and India, and stainless steel sinks from Malaysia. Repeated Chinese lockdowns have delayed many shipments, including lockdowns in the Ningbo section near Shanghai, which delayed shipments of its plumbing supplies last month. Many consumers are now wary of relying on China because of tariffs, geopolitical tensions and questions about China’s possible role in the origin of the coronavirus, he added.

“Reliability has taken me away, and the comfort of customers who don’t want to order from China,” Mr Phipps said.

Li Yu Contribution research.

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