China's commercial hub of Shanghai reported on Friday a broad decline in its economy last month when a city-wide COVID lockdown shut factories and kept residents at home, sparking concerns among foreign firms over their presence in the country.To get more
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Output of Shanghai's industries, located at the heart of manufacturing in the Yangtze River Delta, shrank 61.5% in April from a year earlier, the local statistics bureau said.That was worse than the 7.5% drop in March and was the biggest monthly decline since at least 2011.
Shanghai, where plants of companies including Tesla (TSLA.O) and Semiconductor Manufacturing International Corp (0981.HK) are based, accounts for 30% of China's key auto components manufacturing and 40% of its chipmaking capacity.
While Shanghai's COVID caseload has declined, and the city of 25 million people plans to normalise life in June, analysts say the spillover impact of its lockdown is far-reaching, raising concerns about China's role in global supply chains as many multinational companies could reassess their operational risks in China. Even if the lockdown is lifted next month, curbs on overseas travel of its citizens and the risk of further Omicron flare-ups are stirring uncertainty, representatives from the European Chamber of Commerce in China said during a roundtable on Monday.
"Many companies and individuals are seriously considering their China presence," said Bettina Schoen-Behanzin, the chamber's vice president.Shanghai's April retail sales nosedived 48.3%, significantly steeper than the 11.1% drop nationally and the city's largest decline since at least 2011.
That dragged down overall retail sales in the Yangtze River Delta, which plunged over 30%.
Property sales by floor area decreased 17% in January-April versus growth of 4.0% in the first three months. In April alone, sales sank 88%, according to Reuters calculations based on the four-month data.
Shanghai’s shops welcomed city residents back today after a gruelling two-month lockdown that had confined 25mn people to their homes in one of the strictest anti-Covid lockdowns in China since the pandemic began.
Policymakers will be hoping that the (still partial) reopening of stores and public transport in China’s biggest city and financial centre can help address the sharp slowdown in growth fuelled by the country’s zero-Covid strategy of mass testing, harsh lockdowns, travel bans and forced quarantine.
The damage has been widespread, from retail sales, which were down 11 per cent in April, to manufacturing, which shrank for the third month in a row in May, according to new survey data out this morning. Fresh restrictions announced today in Hong Kong are a reminder that the virus is still far from done.
During the pandemic peak periods of 2020 and 2021, Chinese manufacturing benefited from surging demand for computing and domestic tech. However, as economies reopened the emphasis shifted to services, denting demand for Chinese exports, which grew just 3.9 per cent in April, the slowest rate since July 2020. Rising inflation, fuelled by Russia’s invasion of Ukraine, makes a repeat of the previous export-led recovery, supported by domestic consumption, even less likely. The country also remains mired in a property sector crisis.
