Recently, the China authorities have been releasing financial data intensively, which can’t be described as good news. In April, the growth rate of social financing declined, new loans to enterprises dropped sharply year on year, and foreign direct investment dropped 30% from a year earlier.
Officials from the Communist Party’s Bureau of Statistics said the economic decline in April was temporary and phased, but many believe the foundation of China’s economic development has been shaken.
The overall economic downturn is surprising
The growth rate of industrial value-added above the scale dropped by 2.9% year on year in April. It’s the first time since the pandemic outbreak in 2020 that the growth rate turned from positive to negative.
Twenty-three out of 41 major industries saw their industrial value-added drop year on year. In addition, the output of 448 out of 617 products fell year on year, power generation dropped by 4.3% year on year, and the production of automobiles, cement, crude steel, and other products were down.
Although Shanghai has announced plans to resume about 4,400 companies, including 666 enterprises in the first batch, only 100,000 return-to-work permits have been issued.
Chinese language media XiwangZhisheng cited a source. He said that there were still many supply chain interruptions, and the resumption of work was mainly in key industries such as automobiles and chips.
This person said that other industries, including central enterprises in Shanghai, have not resumed work due to financial loss and production disruptions.
Shanghai’s total retail sales of consumer goods showed negative growth in March in different cities. However, the data in April showed a 6.1% fall in the whole social production index while the total retail sales of consumer goods fell by 11.1%.
The consumption of catering, clothing, shoes, hats, cosmetics, gold, silver, jewelry and communication equipment fell by more than 20%.
The most affected was the consumption of automobiles. It dropped by 31% due to the disruption of the supply chain and the suspension of production.
Among the service industries, the one that has continued to be hit hard for three years is tourism-related industries.
Recently, the Chamber of Commerce of the All-China Federation of Industry and Commerce in Tourism, in conjunction with the National Travel Industry Network, organized a special survey on the unemployment status of workers during the epidemic. According to the survey, about 68% of the employees were unemployed, and more than half of them had been unemployed for more than one year.
Foreign capital inflows fell 30% month-on-month in April
According to data from the Bureau of Statistics of the Communist Party of China, the cumulative growth of fixed-asset investment from January to April was 6.8% year-on-year, 2.5% points lower than that from January to March.
This is consistent with the social financing data released by the central bank on May 13. New loans in April were around 97 billion dollars, a year-on-year decrease of about 124 billion dollars. This is significantly lower than the market’s expectations of 217 billion dollars. Companies and residents do not want to take out loans to save more money.
According to data from January to March, the use of foreign investment was around 380 billion yuan (57 billion dollars), up 25% year-on-year. However, data from January to April shows only a 20% growth.
As a result, April is dragging down the overall data. The actual utilization of foreign investment was about 15 billion dollars, down sharply by 30% from March’s data.
A source reports to Chinese language media Xiwangzhisheng that foreign investors are now very confused as they don’t know what’s happening in China and what to expect.
The top ten cities’ financial strength is deteriorating.
A survey conducted by Nomura Securities in mid-April showed that 45 Chinese cities had implemented full or partial closures. These cities account for more than a quarter of China’s total population and 40% of China’s GDP.
The recent plunge in fiscal revenue has caused widespread concern.
Shenzhen Municipal Bureau of Finance announced that Shenzhen’s general public budget revenue achieved nearly 19.6 billion dollars, down 12.6% from January to April this year. The general revenue was only 3.8 billion dollars in April, down 44% year-on-year.
Moreover, China’s top 10 largest cities saw significant declines in April general public budget revenues. Among them, Nanjing and Suzhou were hit hardest. Their general public budgets were down about 55% and 50%, respectively.
Regarding the sharp decline in fiscal revenue in the first four months, the Shenzhen Finance Bureau explained that the policy reduction was mainly due to the central government’s combination of tax support policies.
However, the tax cut policy is only one aspect of the fiscal revenue reduction. Other reasons include:
The impact of the Zero COVID policy.
General difficulties in business operations.
According to Chinese media outlet Xiwangzhisheng, what has had an even greater impact on local finances is the significant drop in land concessions, which is already an obvious fact.