China struggles with weak post-COVID economic recovery
Yizhuan Automobile Co., a manufacturer of trash trucks, experienced a surge in sales following the easing of anti-virus measures in China last December. However, their growth has since slowed down as company managers strive to recover from the business setbacks caused by the pandemic.
Although China’s economy initially showed signs of recovery in early 2023, both factory output and consumer spending have started to decline after a strong first quarter.
An official survey conducted in April revealed a concerning trend, with a record number of one in five young workers in cities being unemployed.
According to Yu Xiongli, the deputy general manager of Yizhuan, the company’s sales have only managed to increase by single-digit percentages compared to the previous year’s depressed levels. The company, which employs 300 individuals, is situated in Hubei, the province where the first cases of the coronavirus were detected in late 2019.
”It is still in the process of recovering,” Yu said.
China’s economy experienced a growth rate of 4.5% compared to the same period the previous year, during the three months ending in March. This marked an acceleration from the previous quarter’s growth rate of 2.9%. However, experts predict that the peak of this economic recovery may have already occurred.
Further growth would be required to meet the ruling Communist Party’s annual target of achieving a growth rate of approximately 5%.
“For now, the ongoing momentum seems not that promising,” said UBS economist Zhang Ning.
The economy needs a “domestic demand rebound” with government support to boost confidence for businesses and consumers, Zhang said.
Medical workers pose for photos after seeing cured patients off at the Wuchang temporary hospital in Wuhan, central China’s Hubei Province, March 10, 2020. (Xinhua/Xiao Yijiu)
Challenges Persist as China’s Economic Recovery Faces Weak Retail Sales and Slowing Factory Output:
The lifting of restrictions that resulted in prolonged city isolations and restricted international travel raised expectations for a consumer-driven economic boost. However, retail sales remain sluggish as consumers express concerns about the uncertain economic future and potential job losses, leading them to be cautious about making significant purchases.
In April, retail sales saw a notable increase of 18.4% compared to the previous year, which was still significantly lower than the projected growth of up to 35% according to private sector forecasts. Meanwhile, factory output experienced a decline of 0.5% compared to March, and the pace of investment growth also slowed down.
“I have misgivings about spending money,” said Xue Liang, who works in information technology in Beijing. ”
Manufacturing Contraction and Declining Exports Pose Challenges for Chinese Industries:
In May, Manufacturing contracted a sharper contraction, as indicated by a survey conducted by the national statistics agency and an industry group. Both new orders and export orders declined.
The decline in exports in May amounted to a 7.5% drop compared to the previous year, largely influenced by subdued global consumer demand due to interest rate hikes implemented by the Federal Reserve and central banks in Europe and Asia to mitigate inflation. Notably, exports to the United States plummeted by 18.2%.
This poses a challenge for automakers and other manufacturers who are aiming to compensate for weak domestic demand by increasing their sales in international markets.
Challenges and Opportunities for Chinese Automotive and Security Businesses in Post-COVID Era:
Tenglong Automobile Co., a manufacturer of electric buses in Xiangyang, and Yizhuan in Shiyan, a supplier of sanitation and cargo trucks, have been actively seeking international orders in countries like Russia, South Korea, and Southeast Asia to revive their sales. However, customers in Beijing, including Li Yichun who operates a bodyguard business, are displaying reduced willingness to spend.
“Last year, our foreign customers basically didn’t come,” said Tenglong’s deputy general manager, Zhou Shengming. “But this year, we already have had several batches. In May, we had three.”
“It can be seen from my business that the economy is not recovering very well,” Li said. “A lot of clients who are bosses are not intending to spend on hiring as they did before.”
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AP video producer Wayne Zhang contributed.
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