COVID-19 affects global markets as China recovers
Whilst China’s new reported cases of COVID-19 fell towards the end of February compared to earlier in the month, the spread of the infection in Europe and other parts of the world grew. The rapid spread of the virus beyond China’s borders was accompanied by a widespread decline in investor confidence, shaking the foundations of global markets. As China moves past the worst of the virus and other countries seek to rein it in, the success of efforts by various governments and international bodies to further limit the economic impact the virus has on numerous industries will remain to be seen.
Key Economic Indicators
The consumer price index (CPI) rose by 5.2 percent year-on-year (y-o-y) in February 2020, a slight decrease from 5.4 percent in January. Pork prices continue to soar, increasing by 135.2 percent y-o-y, with overall food prices increasing by 21.9 percent. A slow return to work by the labour force resulted in supply chain disruptions, impacting food prices. Measures to limit the transport of goods and people across the country also delayed delivery times and increased costs. The producer price index (PPI) dropped by 0.3 percent y-o-y, following the 0.1 percent increase in January.
PMI reveals first official figures of virus impact
China’s February purchasing manager’s index (PMI) came in at 35.7, its lowest reading since November 2008 when the global financial crisis saw China’s PMI drop to 38.8. The extension of the Chinese New Year holiday period, as well as the delay in employees returning to the workplace drastically reduced the output of China’s economy in February. These figures are some of the first to indicate the effects the virus shall have on Chinese, as well as the global economy. The sub-index for manufacturing production fell to 27.8, a large drop from January’s figure of 51.3. New orders also fell, coming in at 29.3 following an expansionary figure of 51.4 in January.
Chinese President Xi Jinping visits virus epicentre
President Xi Jinping visited Wuhan, the capital of Hubei province and the epicentre of COVID-19 in China, on March 10th. While the number of cases in China rose sharply at the beginning of February, new reported daily cases began to decline in the beginning of March, indicating the success of China’s efforts to contain the spread of the disease. President Xi Jinping’s visit rallied confidence in China and signalled a return to normalcy after weeks of the virus impacting various industries and sectors in the country.
This article is published in The Econometer section of ChinAfrica magazine (April 2020), an English and French language monthly publication that provides news, views and analysis on all things China, Africa and China-Africa relations.