China has halved the growth of industrial production

The latest batch of statistics from the National Bureau of Statistics of the People’s Republic of China for November can serve as at least part of the explanation for the large-scale statements by the Chinese authorities to ease coronavirus restrictions and “localize” lockdowns, previously widely used to limit the spread of COVID-19 as part of a “zero tolerance” policy for infection. This significantly limited economic activity and foreign trade (China’s exports in November fell by 8.7% yoy, imports – by 10.6%) and caused social protests. Now the arbitrary extension of lockdowns to entire districts and cities will be considered redundant (see Kommersant of December 8).

The new data shows an acceleration in the fall in domestic retail sales in November to 5.9% yoy from a 0.5% decline in October (with a consensus forecast for a fall of 3.7%) – now the figure is at its lowest level since May, indicators since the beginning of the year have also gone into the negative zone: in January-November, retail sank by 0.1%, statistics record a sharp, by 10%, decline in sales of building materials.

China’s industrial production growth slowed to 2.2% yoy from 5% in October and 6.3% in September amid anti-COVID restrictions and a slowdown in construction (experts surveyed by Trading Economics expected an average growth of 3.6%) . In particular, the output of the agro-industrial complex of China decreased by 2.9%, in light industry – by 4.7%, and power generation – by 1%. Against this background, unemployment in China in November rose to a semi-annual peak of 5.7% (5.5% in October).

Also, the data of the National Bureau demonstrate a reversal of the trend in the dynamics of capital investments – a sharp slowdown in the growth of investments in fixed assets to 5.3% (January-November compared to the same period last year); even in January-October, the growth rate was 5.8% (see chart).

Whether the statements of the Chinese authorities on easing anti-COVID measures are aimed at restoring economic activity or only at calming social protests, it will probably become possible only in terms of macro indicators in early 2023: a sharp exit from the lockdown against the background of the low effectiveness of the Chinese vaccine threatens to spread repeated waves of coronavirus infection and other respiratory diseases.

Oleg Sapozhkov