China’s mixed data point to challenge of rebooting economy

Chinese exports rebounded in April but the country’s services sector remained sluggish, hinting at the challenge facing the world’s second-largest economy as it tries to recover after the coronavirus lockdown.

Exports rose 8.2 per cent in April year on year, following a 3.5 per cent decline in March and a 15.8 per cent plunge in the first two months of the year, according to data released by China’s customs administration.

The recovery was driven by stronger demand from south-east Asia, a region that is one of China’s biggest trading partners, where markets are gradually reopening as the pandemic shows signs of easing. The region reported a 3.9 per cent increase in purchases in the first four months of this year, according to customs data.

Commodity imports are also gaining pace. Iron ore and copper imports, measured by tonnage, grew 22 per cent and 14 per cent respectively last month year on year, as infrastructure construction resumed.

By contrast, trade with the EU and US, where large parts of the economy remain under lockdown, declined 6.6 per cent and 15.9 per cent respectively.

China’s service sector has yet to recover, with the Caixin-Markit services purchasing managers’ index sitting at 44.4 in April, the third consecutive month of contraction. The 50-point level separates contraction from expansion.

Businesses ranging from restaurants to cinemas across the country are either closed or struggling to win customers as fears of a second outbreak of the virus linger. That has hurt corporate performance and taken a toll on the job market, a policy priority for the Communist party.

The employment sub-index of the Caixin-Markit services PMI fell for the first time below the 50 mark in April as hiring activity cooled off.

Some analysts believe the situation could be even worse. Zhongtai Securities, a Shanghai-based brokerage, said in a report last month that up to 70m people, or 21 per cent of China’s adult labour force, was jobless as the virus put the service sector and small factories under stress. The report was censored a day after its publication.

Despite the mixed picture, economists said the figures suggested the world’s second-largest economy was proving durable, even though risks of a hard landing remained.

“There are signs of resilience in the economy,” said Zhong Zhengsheng, chief economist of CEBM Group, a Beijing-based consultancy.

Zhou Hao, an economist at Commerzbank, said, the figures suggested the economy was still in the doldrums but had not been decimated. “China’s economy is still on a downward trend but we are not seeing a meltdown,” he said.

Larry Hu, an economist at Macquarie Group, pointed to challenges and reduced demand even when the EU and US reopen their battered economies.

“How could Chinese exporters keep getting orders when US and European consumers lose their jobs and are struggling to make ends meet?” he said.

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