China is trying to shake off the worst of the pandemic
A handful of tourists visit the normally crowded Yuyuan Garden during the Dragon Boat Festival holiday on June 4, 2022 in Shanghai, where authorities allow a return to normal life and business activity.
CGV | Visual Group China | Getty Images
BEIJING — China is beginning to show signs of recovery from the latest Covid shock.
In a major step towards normality, the capital city of Beijing allowed restaurants in most districts to resume in-store dining on Monday – after a hiatus of about a month. Most other businesses could also restore in-person operations.
The southeastern metropolis of Shanghai, which has been closed for about two months, continued with its reopening plan that began last week. Residents flocked to local campsites and parks during the long holiday weekend that began Friday, according to travel booking site Trip.com.
As people returned to work on Monday, a Baidu traffic jam tracker showed heavy traffic in Beijing and Shanghai during the morning commute – up from light traffic a week earlier. Both cities have also relaxed the frequency of virus testing to three days from two.
After a surge of omicron cases across the country since March, the national daily number of Covid cases has fallen well below 50, according to official data.
Under China’s “dynamic zero-Covid policy” mandate, local authorities have used strict travel bans and stay-at-home orders to control the virus. These restrictions disrupted supply chains and other activities, causing retail sales and industrial production to plummet in April.
“Our high-frequency trackers suggest that barring another severe resurgence of Covid and associated lockdowns, port mobility, construction and operation could return to pre-lockdown levels in about a month,” Goldman Sachs Chinese economist Lisheng Wang and a team said in a report on Saturday. .
However, service-sector businesses that involve close human contact would struggle to “achieve full recovery anytime soon,” the report said. “Unsynchronized closures and reopenings in major cities suggest that the ongoing growth recovery after China’s lockdown should be less abrupt than the V-shaped one in spring 2020.”
Goldman analysts pointed to the absence of growth engines such as exports and real estate, and greater economic costs to control a more transmissible Covid variant than 2020.
Real estate accounts for more than a quarter of China’s GDP, according to Moody’s.
At a press conference last week, People’s Bank of China Deputy Governor Pan Gongsheng gave few signs of further large-scale support for the sector. He noted how the pandemic has limited the construction and sale of real estate. But he highlighted Beijing’s policy to limit speculation in the sector and described the latest moves by authorities to ease some restrictions on home loans.
Data from last weekend’s holiday, dubbed the Dragon Boat Festival, added to indications that the economy won’t return to growth any time soon.
The film’s long-weekend box office of 178 million yuan ($26.75 million) was the Dragon Boat Festival’s worst performance since 2012, excluding the worst of the pandemic in 2020, according to the Maoyan ticketing site.
Spending on domestic tourism during the holidays this year fell 12.2 percent from a year earlier to 25.82 billion yuan ($3.88 billion), according to the Ministry of Culture and Tourism. Tourism.
But for the calendar year, it marked an improvement over May. The nearly $4 billion figure accounted for about two-thirds of spending during the same holiday in 2019. That was better than the recovery to 44% of pre-pandemic levels during a longer holiday in early May, so that Shanghai was still locked down.
Over the past week, survey data from manufacturing and services businesses in May showed a recovery from lows in April. But the data, known as the Purchasing Managers’ Index (PMI), remained in contractionary territory.
The rate of contraction is similar to that between February and March, said Bruce Pang, head of macro and strategy research at China Renaissance. He said that since economic indicators dipped in April, the latest figures show the impact of the pandemic continued in May and the economy remains in its worst condition since the second quarter of 2020.
PMI data showed a continued decline in business plans for hiring.
Pang noted that uncertainty over future earnings, as well as the risk of quarantine for travelers, weighed on tourism spending during the latest dragon boat festival.
Even though much of Beijing and Shanghai are not officially on lockdown, specific buildings or neighborhoods may remain closed due to contact with Covid cases.
Not all companies have resumed work either. Shanghai Disney Resort has been closed since March 21. Universal Beijing Resort is closed from May 1 until further notice.
Disclosure: NBCUniversal is the parent company of Universal Studios and CNBC.