China Is Returning to Work

We, along with the rest of the world, actively watched the daily reports of new coronavirus cases in China – looking for signs of a reversal.

But those aren’t the only numbers we watch.

New data for China Industrial Production, a longstanding benchmark of economic activity in China, was recently released. Not surprising in the wake of China’s quarantines and shutdowns, the data showed that Production dropped significantly during January and February. Production for the three months ending in February was 6.1% below the same three months one year ago, a level of contraction previously unseen in the data’s 24-year history. Further corroborating the Industrial Production data is the decline in China Power Generation. Power Generation in February fell an unimaginable 70.2% below the February 2019 level.

Despite the negative numbers, we can’t lose sight of there being some encouraging numbers, too. Reports out of China are stating that most businesses that survived the outbreak are operating again. Official reports are showing that utilization is increasing again, already at 70% or higher in most areas.

Make no mistake, China’s economy is hurting, and the pain will not go away overnight. Even as China’s Production comes back on line, the rest of the world is still grappling with COVID-19, which is reducing demand for Chinese exports. The US economy is projected to begin recovering late this year, assuming the COVID-19 situation is stabilized by mid-year. China will need its trade partners to be in healthier positions in order for economic recovery to be sustainable late this year.

Jackie Greene
Director of Economics