Factories are reopening in China, where economic activity is picking up actively. A recovery correlated with a sharply declining epidemic.
Of course, this is only patchy information, but it is encouraging. Factories are gradually reopening in China even if they are not yet operating at full capacity. For example, Airbus has restarted its assembly line for the A320 family based in Tianjin, south of Beijing. For its part, Toyota is gradually reopening its three Chinese plants. In Asia, and particularly in China, we see a revival, many projects have restarted” and “if we don’t respond, our competitors will take over the markets.
On March 12, the National Development and Reform Commission (NDRC) issued a circular encouraging the resumption of foreign companies’ activities. It requires the relevant local authorities to make regular visits to international companies and monitor their projects to assess their situation (activities, production, investment).
A revival of the Chinese economy
According to the consulting firm Trivium, the Chinese economy is now operating at 69.5% of its capacity as of March 16, 2020. But Goldman Sachs is already predicting a 9% recession in the first quarter in China. Its forecast for China’s annual growth is now +3% (compared to +5.5% so far).
China has put in place a mechanism to preserve its economic fabric. Thus, on March 13, the Chinese central bank, which unblocked extensions or renewals of corporate loans at the end of February, announced a reduction in the banks’ mandatory reserve ratio, releasing 550 billion yuan (76 billion dollars) to support the economy. The People’s Daily announces on its front page, “the reopening of 79% of major construction sites” in China.
95% of Chinese companies (excluding SMEs) in operation
Half of the foreign companies established in China anticipate a return of activity by the end of March. Why such optimism: 16 of China’s 31 provinces would no longer (officially) have any patients with COVID-19 (Tibet, Qinghai, Fujian, Anhui, Xinjiang, Jiangxi, Shanxi, Hunan, Gansu, Yunnan, Henan, Jiangsu, Chongqing, Tianjin, Guizhou).
China reported Thursday no new contamination of local origin, a first since the beginning of the epidemic. But health authorities reported 34 additional imported cases. China (excluding the territories of Hong Kong and Macao), where the epidemic broke out at the end of December, counted a total of 80,928 cases, including 3,245 deaths and 69,601 recoveries. 34 new cases and 8 new deaths were reported between Wednesday and Thursday.
Nearly 80 percent of companies surveyed by the American Chamber of Commerce in Shanghai said they lacked the staff to open a full production line. And this, although the Chinese authorities have banned layoffs linked to the virus. In this context, Chinese SMEs are severely affected. Excluding Hubei, 60% of SMEs, and 95% of critical size industrial companies would have resumed activity according to the Chinese Ministry of Industry. However, most of them are operating at low levels.