When it really happens: SHTF...

[Gil Boyd]

CHINA HIT BY SECOND WAVE

This emerging pattern poses a grave risk to the chances that the world’s second-largest economy can repair the damage from the closures in February enacted to curb the virus.

Even as policy makers including the Premier, Li Keqiang, talk up a recovery and roll out support measures, the economists continue to cut their growth forecasts.

“It is definitely the second shock-wave for the Chinese economy,” said Xing Zhaopeng, an economist at the Australia & New Zealand Banking Group. The global spread of the virus “will affect China manufacturing through the two key channels of:
• disrupted supply chains
• and declining external demand.”
Furthermore, the markets for manufactures outside of China only now is beginning to respond, and just think what happens when Europe is on total shutdown, and then it is joined by the United States as the pandemic spreads.

The earliest insight from official data into the emerging pain for industry will come on the 31st March, when the Purchasing Managers’ Indices (PMI) for the month are released.

The stark fact remains that unless there is a strong rebound, the record slump in profits seen in the first two months of the year is likely to continue and for some considerable time yet.

In the meantime, firms are saying that cancelled orders, uncertain logistics and delayed payment have become their latest headaches.

While Central Government has been keen to stress that Chinese manufacturing is back to at least 85% of its capacity and in fact it is nearer 90%, anecdotal evidence and other reporting has pointed out that although factories may be open, they are producing little. In some cases in order to provide corroborating evidence of manufacturing, some plants are having to run their machinery but with no production, just so the Central government can point to the energy surge to support its manufacturing claims. All this is unproven of course, but it is clear that some journalists seeking photographic evidence were closely shepherded.