China 95 percent normal


Asian markets recovered in April, following a record fall in March. Carnegie Asia rose 4.8 percent this month.

All in all, China’s strategy for limiting the spread of the virus seems to have worked well. There is a risk of a second wave of infection as restrictions ease, but the country has managed to keep this under control so far.

China is back to 95 percent of normal economic activity, based on an estimate of data for coal sales, energy consumption, transport activity, demand for steel products and sales data for housing and cars. Official statistics continue to show weak growth, and first-quarter GDP fell 6.8 percent, not entirely unexpectedly.

Shops and restaurants have reopened, domestic travel is allowed, and even domestic flights are underway. Over the long weekend of May 1, called Golden Week in China, 50 million Chinese travelled domestically to various tourist destinations. There are usually around 200 million trips, but this is still a good sign given the situation.

This does not mean that everything is back to normal. With the situation in Europe and the US, the outlook for export industry looks very weak. Renewed rhetoric from Donald Trump regarding the origin of the virus means there is a risk that the trade war will flare up again.

Domestic demand and consumption, and government investment, are what will recover first, but consumers are hesitant given the uncertainty about the labour market. The People’s Congress of China, normally held in March, is now scheduled for May 21. New stimulus is expected. Subsidies for electric vehicles have already been renewed, and major investment in infrastructure projects, especially 5G telecommunications, could be one way to support the economy. Another could be liberalisation of home purchase terms and support for consumption.

Developments in China also meant that optimism and risk appetite returned to stock exchanges globally. At the same time, action by central banks, with large support measures and interest rate cuts, mean that capital is returning to the stock market.


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