China’s economy ended the year in a major slump as business and consumer spending plunged last month, with more disruption likely in the first few months of the year as COVID-19 cases surge across the country.
Official data over the weekend showed that the decline in manufacturing worsened last month, while activity in the services sector plunged the most since February 2020.
Separately, a private survey of businesses by China Beige Book International on Monday said the economy likely posted an annual contraction in the fourth quarter of last year.
Photo: Bloomberg
China’s ditching of strict COVID-19 controls last month fueled a surge in infections in major cities, prompting people to stay home as they fell ill or feared becoming infected.
While the outbreak has likely peaked in places such as Beijing, and economic activity is starting to rebound there, the virus is spreading fast across the country. A likely travel rush during the Lunar New Year holiday later this month could see cases spread to rural areas, disrupting activity in the first quarter of this year.
A private purchasing managers’ index survey yesterday confirmed the worsening decline last month.
The Caixin manufacturing index — which covers mainly smaller, export-oriented businesses — dropped to 49 from 49.4 in November.
However, businesses were optimistic about the future, with confidence in the 12-month outlook climbing to a 10-month high.
“China’s growth prospects have been improving with the reopening accelerating,” said Zhou Hao (周浩), chief economist at Guotai Junan International Holdings Co (國泰君安國際控股). “Overall, the darkest hour is gone.”
Economists expect a faster rebound once the infection wave peaks, with growth forecast to accelerate to 4.8 percent this year from an estimated 3 percent last year.
Still, the recovery is likely to be bumpy, and economic activity remains well below pre-COVID-19 levels.
Travel was relatively muted over the three-day New Year holiday.
The number of trips made was little changed from a year earlier, while tourism revenue was up 4 percent from the same period last year, the Chinese Ministry of Culture and Tourism said.
Tourism revenue was just 35.1 percent of the levels reached in 2019, while the number of trips were 42.8 percent.
China Beige Book, a provider of independent data, said its surveys found that the economy likely grew only 2 percent last year.
“With the ongoing COVID tidal wave, investment sliding to a 10-quarter low and new orders continuing to get battered, a meaningful first-quarter recovery is increasingly unrealistic,” China Beige Book chief economist Derek Scissors said.
Policymakers have pledged more fiscal and monetary support to aid the economy’s recovery this year. The Ministry of Finance last week said that fiscal spending would be expanded “appropriately” with the use of policy tools such as the budget deficit.
The central bank also vowed to support domestic demand and maintain credit growth.
China is likely to cut interest rates and the reserve requirement ratio for banks in the first half of the year, while raising the fiscal deficit ratio for this year, a survey of economists published yesterday in state media found.
PATENTS: MediaTek Inc said it would not comment on ongoing legal cases, but does not expect the legal action by Huawei to affect its business operations Smartphone integrated chips designer MediaTek Inc (聯發科) on Friday said that a lawsuit filed by Chinese smartphone brand Huawei Technologies Co (華為) over alleged patent infringements would have little impact on its operations. In an announcement posted on the Taiwan Stock Exchange, MediaTek said that it would not comment on an ongoing legal case. However, the company said that Huawei’s legal action would have little impact on its operations. MediaTek’s statement came after China-based PRIP Research said on Thursday that Huawei filed a lawsuit with a Chinese district court claiming that MediaTek infringed on its patents. The infringement mentioned in the lawsuit likely involved
Taipei is today suspending work, classes and its US$2.4 trillion stock market as Typhoon Gaemi approaches Taiwan with strong winds and heavy rain. The nation is not conducting securities, currency or fixed income trading, statements from its stock and currency exchanges said. Authorities had yesterday issued a warning that the storm could affect people on land and canceled some ship crossings and domestic flights. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) expects its local chipmaking fabs to maintain normal production, the company said in an e-mailed statement. The main chipmaker for Apple Inc and Nvidia Corp said it has activated routine typhoon alert
GROWTH: TSMC increased its projected revenue growth for this year to more than 25 percent, citing stronger-than-expected demand for AI devices and smartphones The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth this year from 3.29 percent to 3.85 percent, as exports and private investment recovered faster than it predicted three months ago. The Taipei-based think tank also expects that Taiwan would see a 8.19 percent increase in exports this year, better than the 7.55 percent it projected in April, as US technology giants spent more money on artificial intelligence (AI) infrastructure and development. “There will be more AI servers going forward, but it remains to be seen if the momentum would extend to personal computers, smartphones and
CHANGE OF FORTUNES: Concern over a pricey valuation and the risk of tighter US curbs on chip sales to China have poured cold water on TSMC’s bullish momentum Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) shares fell the most in three months yesterday upon trading resumption, joining a global technology rout as investors dramatically soured on the promises of artificial intelligence (AI). The shares declined 5.62 percent to close at NT$924 in Taipei, dragging down the benchmark TAIEX, which fell 3.29 percent to 22,119.21 points amid a technical correction, Taiwan Stock Exchange data showed. Other chip stocks also fell, with ASE Technology Holding Co (日月光投控) plunging 9.86 percent, MediaTek Inc (聯發科) dropping 2.35 percent, Realtek Semiconductor Corp (瑞昱) falling 1.33 percent and United Microelectronics Corp (聯電) retreating 1.17 percent, while Apple