While China’s coastal provinces and major cities are recovering from the COVID-19 pandemic, firms in its poorer western and central provinces are falling well behind in metrics such as output and sales revenue, a private survey showed yesterday.
The majority of firms are recovering far more slowly than those in wealthier areas around Beijing, Shanghai and Guangdong, a report from China Beige Book International (CBB) said.
While revenue and profits for the third quarter saw steep declines year-on-year across China, many interior provinces also saw output, domestic orders and sales prices falling from the second quarter as well, according to a quarterly survey of thousands of Chinese firms by the US-based consultancy.
Photo: Reuters
For instance, revenue increased 41 percent quarter-on-quarter for Shanghai and the wealthy eastern provinces of Zhejiang and Jiangsu, but fell by 10 percent in the more remote western regions of Tibet, Gansu, Qinghai and Xinjiang, it said.
“For the corporate elite — large firms and those based in the Big 3 coastal regions — the economy is accelerating... But the rest of China — most firms in most regions — are seeing a far more muted recovery,” CBB chief economist Derek Scissors said in comments issued with the survey.
Last month, China’s industrial output accelerated the most in eight months, while retail sales grew for the first time this year, suggesting the economic recovery is gathering pace as demand starts to improve more broadly from the COVID-19 crisis.
However, the retail recovery is unbalanced and spending on luxury goods, vehicles and electronics is leading the charge, rising faster than food, clothing and other essentials.
While the supply side of China’s economy has shown resilience, a strong and broad rebound in spending is needed for a more meaningful economic recovery. Even though the virus is under control, income and job losses due to the pandemic have made poorer Chinese unwilling or unable to increase spending, keeping a lid on the rebound.
“Higher-income households have probably built up savings, because of the forced reduction in consumption during lockdown, and could now be ready for a spending spree. It is lower-income households that face a longer slog of normalizing their finances,” Gavekal Dragonomics (龍洲經訊) analyst He Wei (何暐) said in a recent report.
The lopsided recovery can also be seen in the auto market.
Sales of luxury vehicles have recovered much quicker than regular ones, and are now almost one-fifth of all vehicles sold.
Regional divergences were also visible in credit, CBB said, with a far higher proportion of companies in the wealthy areas around Beijing, Shanghai and Guangdong accessing capital.
“Borrowing levels stayed flat or fell outright in 4 of 5 non-coastal regions,” CBB said in the report.
Additional reporting by Bloomberg
RIPPLE EFFECT: US stocks closed higher in volatile trade on Friday to snap a four-session losing streak as investors wrestled with a mixed jobs report and comments from US Federal Reserve officials on the pace of interest rate hikes. The S&P 500 and the NASDAQ each rose as much as 2 percent in the early stages of trading, while the Dow Jones Industrial Average climbed as much as 1.9 percent on the heels of the closely watched labor market report, before paring gains and briefly falling into negative territory. The report showed an uptick in the unemployment rate last month, indicating that some
FACTORY REDUCTION: Manufacturing at the Zhengzhou plant has recovered, the company said, as analysts expect Hon Hai to diversify production in Vietnam and India Hon Hai Precision Industry Co (鴻海精密), the main assembler of Apple Inc’s iPhones, yesterday said it plans to lower its business outlook for this quarter as the COVID-19 pandemic reduced factory utilization at its largest iPhone manufacturing site, in Zhengzhou, China. “The company’s visibility for the fourth quarter is cautiously optimistic, but due to the pandemic affecting some of our operations in Zhengzhou, the company will revise the outlook downward for the fourth quarter,” Hon Hai said in a statement yesterday. Hon Hai, also known as Foxconn Technology Group (富士康科技集團) internationally, said it is now “working with the [Chinese] government in a
DECLINE ENDS: The central bank softened its intervention in the local foreign exchange market by trading both ways as it sought to stabilize the NT dollar, a bank official said Taiwan’s foreign exchange reserves last month reached US$542.79 billion, rising US$1.69 billion from a month earlier and ending three months of decline on the back of bond yields and value gains in other reserve currencies, the central bank said on Friday. “The market appeared relatively stable last month compared with the preceding three months, although foreign funds continued to pull out of Taiwan on expectations of further monetary tightening by the US Federal Reserve,” Department of Foreign Exchange Director-General Eugene Tsai (蔡炯民) told an online news conference in Taipei. Foreign portfolio managers last month wired abroad more than US$3 billion in cash
OUTPUT LOSS: A heavy dependence on China invites operational risks, especially as the US-China trade dispute shows no sign of being resolved, a consulting firm said The lockdown of Foxconn Technology Group’s (富士康科技集團) Zhengzhou factory, which is the world’s largest producer of iPhones, has highlighted some of the risks of relying on China’s manufacturing sector amid its ‘zero COVID’ policies, analysts said. Foxconn — known as Hon Hai Precision Industry Co (鴻海精密) in Taiwan and Apple Inc’s principal subcontractor — has seen a surge in COVID-19 cases at its Zhengzhou site, leading the company to lock down the vast complex in a bid to keep the virus in check. Images soon after emerged of panicking workers fleeing the site on foot in the wake of allegations of poor