China’s factory output and retail sales remained weak last month, official data showed yesterday, with tepid demand and lingering COVID-19 restrictions putting a damper on growth in the world’s second-largest economy.
The government is persisting with a “zero COVID” strategy to stamp out clusters as they emerge, but this has placed companies and consumers at the mercy of snap, economically damaging lockdowns.
The American Chamber of Commerce (AmCham) yesterday said that Shanghai’s lengthy COVID-19 lockdown pushed one-quarter of US firms in the city to cut investment plans and nearly all to drop revenue forecasts.
Photo: AFP
Retail sales sank 6.7 percent year-on-year, the Chinese National Bureau of Statistics said, although that was an improvement from April’s 11.1 percent drop.
The figure was also slightly better than forecasts from analysts polled by Bloomberg.
“In May, our economy gradually overcame the adverse impact of the pandemic,” National Bureau of Statistics spokesman Fu Linghui (傅令輝) told reporters. “But we also have to see that the international environment has become more complex and severe, and the domestic economic recovery still faces many difficulties and challenges.”
It was the third consecutive month of contraction in retail sales, suggesting that nervous consumers are tightening their purse strings with the persistent threat of COVID-19 lockdowns.
However, industrial production was up 0.7 percent after falling 2.9 percent in April, while the urban unemployment rate ticked down to 5.9 percent.
Shanghai, China’s most populous city, this month started emerging from a grueling two-month lockdown, providing a boost to economic sentiment.
Tommy Wu (胡東安), lead China economist at Oxford Economics, speculated that the “worst of lockdowns is probably behind us.”
However, he added that it will be “difficult for household consumption to recover strongly” as long as China’s “zero COVID” strategy remains in place.
Concerns are mounting over the trend in unemployment, as millions of students graduate in the summer, Pinpoint Asset Management Ltd (保銀私募基金管理) chief economist Zhang Zhiwei (張智威) said.
Unemployment among rural migrant workers remained elevated, while home sales in the first five months dropped 34.5 percent, data showed.
Observers remain cautious about the government’s reluctance to transition away from the “zero COVID” strategy, despite fine-tuning.
More than 90 percent of US companies in the metropolis surveyed by AmCham Shanghai have cut their revenue projections for the year, the group said in a report yesterday.
The survey of 133 companies also found that one-quarter were expecting revenue to be more than 20 percent lower than projected.
Nearly 25 percent of companies surveyed have cut investment plans, AmCham Shanghai said.
AmCham said that about one-quarter of manufacturers surveyed were speeding the localization of their China supply chains, while moving production of global goods out of the country.
As of early this month, only 35 percent of the manufacturers polled were operating at full capacity and close to three-quarters of all firms surveyed had yet to enjoy economic support measures since Shanghai’s lockdown.
AmCham Shanghai president Eric Zheng (鄭藝) said the lockdown’s impact on businesses has been “profound.”
“The Shanghai government must act quickly to ensure unhindered supply chains, logistics and worker mobility, and to accelerate the provision of financial support to businesses,” Zheng said.
This week, analysts at Fitch Ratings downgraded China’s growth predictions for the year to 3.7 percent based on the “cautious pace at which pandemic-related restrictions have been eased.”
That would be far below China’s target of about 5.5 percent full-year growth.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) halted shipments to a customer this month after its semiconductors were sent to China’s Huawei Technologies Co (華為), potentially breaching US sanctions, a government official said. The US slapped sanctions on Huawei in 2019, and expanded them the following year, over fears its technology could be used for Beijing’s espionage operations. The restrictions prevent TSMC from selling semiconductors to Huawei. However, TSMC discovered on Oct. 11 that chips made for a “specific customer” had ended up with the Chinese company, a Taiwanese official with knowledge of the incident said on the condition of anonymity. TSMC “immediately activated
REGIONAL COMPETITION: Over the past few years the Philippines has lost ground to neighbors such as Vietnam, Indonesia and Malaysia, a Philippine official said The Philippines is trying to enlist Taiwanese chip giants to expand in semiconductors, a bid to catch up with its neighbors who are emerging as significant suppliers in the industry. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電) are among companies the Philippines is reaching out to as it seeks equipment and expertise to build out chip fabrication operations, said Dan Lachica, head of the Southeast Asian country’s main electronics industry group, the Semiconductor and Electronics Industries in the Philippines Foundation Inc (SEIPI). The association is working with Philippine officials in Taiwan to talk with potential
Nvidia Corp is set to unveil investment plans for Thailand, joining Alphabet Inc and Microsoft Corp, as Southeast Asia becomes a hot spot for building artificial intelligence (AI) data centers and manufacturing the components that power them. The US chip designing firm would announce investments during chief executive officer Jensen Huang’s (黃仁勳) trip to Bangkok in December, Thai Minister of Commerce Pichai Naripthaphan said on Monday. He declined to give details on the investment or how much the company would bring into Thailand. The investment by Nvidia could lead to more funding “with related clusters following suit,” Pichai said. Clinching
US SANCTIONS: The Taiwan tech giant has ended all shipments to China-based Sophgo Technologies after one of their chips was discovered in a Huawei phone Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) suspended shipments to China-based chip designer Sophgo Technologies Ltd (算能科技) after a chip it made was found on a Huawei Technologies Co (華為) artificial intelligence (AI) processor, according to two people familiar with the matter. Sophgo had ordered chips from TSMC that matched the one found on Huawei’s Ascend 910B, the people said. Huawei is restricted from buying the technology to protect US national security. Reuters could not determine how the chip ended up on the Huawei product. Sophgo said in a statement on its Web site yesterday that it was in compliance with all laws