This episode covers the European Chamber’s comments on the ’20 Measures’, which are aimed at optimising China’s COVID containment policy; data on Chinese manufacturing and services activity in November released by China’s National Bureau of Statistics; the International Monetary Fund’s annual examination of the state of China’s economy and predictions of economic growth; and industrial profits during the first ten months of 2022. In addition, the European Chamber will host its annual conference dedicated to China’s economic outlook on the 9th of December.
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European Chamber comments on the 20 Measures:
Official PMI, November (in Chinese):
January-October profits of Chinese industrial firms (in Chinese):
European Chamber Annual Conference:
RUI: Hello and welcome to China Shortcuts,
MARIANN: the European Chamber’s weekly catchup about the Chinese business landscape.
RUI: COVID-19 flare-ups and varying degrees of related lockdown and quarantine measures have continued to test both businesses’ resilience and people’s patience in several major Chinese cities over the past week.
MARIANN: On the 23rd of November, the European Chamber submitted comments to the Chinese Ministry of Commerce and the China Council for the Promotion of International Trade regarding the country’s COVID-19 containment policy and the recently released ‘20 Measures’, which are aimed at optimising China’s dynamic zero-COVID strategy. Although the Chamber welcomes the introduction of the measures, it also expressed concern over the lack of proper preparation for their introduction, as local governments appeared to have not been well informed prior to their release. This has led to erratic implementation across different parts of China, creating a great deal of uncertainty among the public and causing a significant drop in business confidence.
RUI: The European Chamber believes that China should continue to remove stringent COVID-control measures to the greatest extent possible based on scientific evidence and strive to get life back to normal. To this end, the Chamber put forward a list of recommendations for the Chinese government’s consideration.
MARIANN: The recommendations include the introduction of a robust vaccination drive, particularly among more vulnerable groups, and the promotion of a comprehensive, nationwide education campaign about COVID-19 to alleviate any anxiety about potential infection and to illustrate that being fully vaccinated significantly reduces the risk of serious disease.
RUI: According to China’s National Bureau of Statistics, Chinese manufacturing and services activity shrank further in November, with non-manufacturing activity falling to the lowest level since the first set of measures were introduced in China to curb the spread of COVID-19 in February 2020.
MARIANN: The official purchasing managers’ indices or PMI dropped further below the 50-point mark that separates growth and contraction. The activity of small-sized companies fell sharply from October, while that of large and medium-sized enterprises also decreased, albeit at a softer pace. Supply and demand both weakened further, with demand contracting slightly more. Companies continued trimming their staffing levels as a consequence. As for non-manufacturing, the construction sector’s expansion continued to slow down, while the decrease of services activity accelerated further, with 15 out of 21 surveyed industries contracting in November.
RUI: The International Monetary Fund has concluded its annual examination of the state of China’s economy, and urged Beijing to recalibrate its COVID-19 strategy and take further action to ease the property sector crisis to support growth.
MARIANN: In a statement issued on 23rd November, the IMF highlighted that following an impressive recovery from the initial impact of the pandemic, China’s growth has slowed and remains under pressure. According to the statement, the combination of more contagious COVID variants and persistent gaps in vaccinations have led to the need for more frequent lockdowns, weighing on consumption and private investment. The IMF called on China to accelerate its vaccination drive to counter the downward trend, and projected 3.2 per cent GDP growth for 2022. It added, that if the current zero-COVID strategy can be gradually and safely lifted in the second half of 2023, GDP growth could improve to 4.4 per cent in the next two years.
RUI: China’s large industrial firms saw their profits fall rapidly during the first 10 months of 2022.
MARIANN: According to the National Bureau of Statistics, industrial profits declined 3.0 per cent from January to October 2022, compared to the same period a year prior. The rate of decline was the fastest since August 2020. The official dataset revealed that privately-owned industrial companies were the worst hit, with their profits dropping more than 8 per cent year-on-year. Meanwhile, state-owned industrial firms saw their profits grow, albeit at a moderate pace during the first 10 months of 2022. A breakdown by sectors showed that companies in the energy and mining sectors fared much better than those in manufacturing, with profits in the oil and gas extraction sector more than doubling from the same period last year.
RUI: The European Chamber will host its annual conference dedicated to China’s economic outlook on the 9th of December.
MARIANN: Join us to hear a distinguished group of global thought leaders from academia, industry, think tanks and government discuss what path China will likely take in the face of a host of domestic challenges and external pressures.
RUI: Thanks for listening. Tune in again next week.
MARIANN: In the meantime, find useful links in the episode notes.