Economy/Resources - 85. page

COVID 19 has hit China’s economy hard, especially in the retail industry. In the Xinjiekou commercial area of Nanjing, Jiangsu province, some netizens took pictures which show that there were more than a dozen shops on the street with “For Sale” signs on them. Scholars believe that as the COVID 19 outbreak continues to worsen in the US and other Western countries, foreign countries will stop imports from China. Thus there will be more Chinese companies that will face bankruptcy. One resident in Wuhan said that many small businesses are trying to think of a backup plan. Once the lock-down in Wuhan has ended, many of the small businesses won’t be able to survive even with a loan from the government. This applies to retail business in Zhejiang, Fujian province and all the way to Helongjiang province in the northeast part of China. A retired Economics Professor at Sichuan University told Radio Free Asia (RFA) that there will be a wave of business shutdowns. As COVID 19 continues to spread around the world, more businesses will close. The impact is no different from a world war.

According to private surveys, nearly 30 percent of China’s population has no savings in the bank. Since the national economy has been shut down for the past two months, the local government’s fiscal revenue has also been greatly affected. Provinces and municipalities have recently announced their February fiscal revenue. Among them, Hubei is the worst. After deducting the income from land, the fiscal revenue fell 98.5 percent compared to the same period last year. Henan, the neighboring province of Hubei also fell 30 percent and Guangdong, a major export province, fell 27 percent. Most provinces and cities have fallen by more than 20 percent.

Source: Radio Free Asia, April 3, 2020
https://www.rfa.org/mandarin/yataibaodao/jingmao/ql2-04032020055206.html

Xu Xiaonian, a professor of economics and finance at the China Europe International Business School, said that as long as the pandemic in Europe and America is not over, Chinese export companies will have no orders, and a recession is inevitable. Xu made the remarks at the CEIBS Alumni Association on the evening of March 26 when discussing the outlook for the recent pandemic and the Chinese economy.

Xu Xiaonian said in his speech that the current rate of resumption of work is actually meaningless. “Where are the orders?”  He asked.

Xu believes that many of the online discussions about an international pandemic are “foolish.” As long as the pandemic in Europe and America is not over, China has no orders; workers have no wages and there is no consumption. “We are not able to finish the rest of the course by ourselves. We have to accompany the whole world to finish the entire journey. Only when the world economy returns to normal can China be normal. ”

“We can’t close the door and play by ourselves. We are not only short of food and oil, but we are also short of markets; we are short of orders. Our per capita GDP is one-fifth of that of the United States and one-fourth that of Europe. The domestic purchasing power cannot support our enormous manufacturing capacity.”

He also said, “We still lack raw materials, especially the technology-intensive basic raw materials, which must be imported from South Korea, Japan and Germany. We lack technology, and technology cannot be developed rapidly when we close the door.”

Source: Sina, March 30, 2020

https://cj.sina.com.cn/articles/view/2662090253/9eac460d01900lzr0?cre=tianyi&mod=pcpager_fintoutiao&loc=18&r=9&rfunc=100&tj=none&tr=9

According to The Paper, China’s Politburo held a meeting on March 27. For the first time, it proposed to “appropriately raise the fiscal deficit rate and issue special government bonds” to deal with the impact of the epidemic on the economy. A number of economists recommended a deficit rate of 3.5 percent versus 2.8 percent in 2019. It would bring in 700 billion yuan (US$99 billion). Meanwhile they also recommended issuing a special government bond of no less than 1 trillion yuan (US$140 Billion). Moreover, they reiterated that the local government could increase the scale of their special debt limit from 2.15 trillion yuan (US$300 billion) for 2019. If the deficit rate for 2020 were to increase to 3-4 percent, it would mean that the local government debit limit could go up to 4 trillion yuan (US$560 billion).

Source: The Paper, March 27, 2020
https://www.thepaper.cn/newsDetail_forward_6721099

China Economy recently reported that, on March 19, Chinese currency RMB fell 865 base points, against the US Dollar, in offshore trading. At the same time, the RMB fell 938 base points onshore. This is the first time since October 2019 that the Chinese RMB fell below 7.16 Yuan for one US Dollar. The U.S. Dollar has seen strong growth recently, with high demand across the globe. It is becoming the core asset for managing risks because of its nature of being fully exchangeable with full global circulation. Experts expressed their belief that the significant decline of the Chinese RMB is typical for a market full of volatility.  At the same time, China is facing high pressure on interest rate reduction. Some investment organizations pointed out that the Chinese currency is looking at further devaluation in the near term and in the foreseeable future. Offshore RMB (CNH) is RMB that circulates outside Mainland China. CNH settlements are typically done in Hong Kong, Singapore, London and Luxembourg.

Source: China Economy, March 19, 2020
http://www.ce.cn/xwzx/gnsz/gdxw/202003/19/t20200319_34527615.shtml

Xinhua recently reported, based on data that the Chinese National Bureau of Statistics released, that China’s February manufacturing PMI index saw a free fall to 35.7 percent, down by 14.3 percentage points from January. Apparently the coronavirus pandemic was a direct cause of the sharp decline. Among the sub-indexes of the manufacturing PMI, month-over-month, new orders fell 22.1 percent, the raw material inventory fell 13.2 percent, employment fell 15.7 percent, and supplier delivery time fell 17.8 percent. All aspects of manufacturing in China suffered major slow-downs in February. In the meantime, non-manufacturing PMI declined 24.5 percentage points to 29.6 percent, month-over-month. However, financial services and capital market activities are still expanding. For the sectors of broadcasting, satellite services, and internet services, the market saw minor declines – significantly above average. The construction sector had the most significant decline with a month-over-month drop of 33.1 percentage points, to 26.6 percent. China’s overall PMI for February was 28.9 percent, which was 24.1 percent below January. PMI is an indicator of financial activity reflecting purchasing managers’ acquisition of goods and services. A PMI number below 50 typically reflects a decline.

Source: Xinhua, February 29, 2020
http://www.xinhuanet.com/fortune/2020-02/29/c_1125642377.htm