Few tourists visit the usually crowded Yuyuan Park during the Dragon Boat Festival holiday on June 4, 2022 in Shanghai, as authorities allow a return to normal life and business.
Vcg | China Optical Group | Getty Images
BEIJING – China is beginning to show signs of recovery from the latest COVID shock.
In an important step toward normalcy, the capital, Beijing, allowed restaurants in most areas to resume dining in stores on Monday – after a hiatus of nearly a month. Most other companies can also restore in-person operations.
The southeastern city of Shanghai, which has been on lockdown for nearly two months, has continued with a reopening plan that began last week. Residents flocked to camping sites and local parks during the long weekend that began Friday, according to travel booking site Trip.com.
As people returned to work on Monday, Baidu’s traffic congestion tracker showed heavy traffic in Beijing and Shanghai during the morning commute — versus light traffic a week earlier. The two cities also reduced the frequency of virus testing to three days from two.
After an increase in omicron cases nationwide since March, the number of daily COVID-19 cases nationwide has fallen below 50, according to official data.
Under the mandate of China’s “dynamic no-coronavirus policy”, local authorities have used strict travel bans and stay-at-home orders to control the virus. These restrictions disrupted supply chains and other activities, which led to a decline in retail sales and industrial production in April.
“Our high-frequency trackers indicate that, barring a severe resurgence of Covid-19 and related shutdowns, mobility, construction, and ports can recover to pre-existing levels,” Lisheng Wang, an economist at Goldman Sachs in China, and his team said in a report on Saturday. Closing in about one month. .
However, the report said that companies in the services sector that involve close human contact will find it difficult to “make a full recovery anytime soon”. “Asynchronous closings and reopenings across major cities suggest that China’s ongoing growth recovery post-lockdown should be less severe than the V-shaped recovery in spring 2020.”
Goldman analysts pointed to a lack of growth drivers such as exports and real estate, and greater economic costs of controlling a more transmissible Covid variant than in 2020.
Real estate accounts for more than a quarter of China’s gross domestic product, according to Moody’s.
During a press conference last week, People’s Bank of China Deputy Governor Pan Gongsheng gave few indications of additional broad-based support for the sector. He noted how the pandemic has restricted the construction and sale of real estate. But he stressed Beijing’s policy of curbing speculation in the sector, and described the authorities’ recent moves to ease some restrictions on mortgage loans.
Data from last weekend, called the Dragon Boat Festival, added to indications that the economy won’t return to growth anytime soon.
The long-weekend box office of 178 million yuan ($26.75 million) was the Dragon Boat Festival’s worst performance since 2012, with the exception of the worst pandemic in 2020, according to ticket website Maoyan.
Spending on domestic tourism during this year’s holiday fell 12.2% from last year, to 25.82 billion yuan ($3.88 billion), according to the Ministry of Culture and Tourism.
But for the calendar year, it’s an improvement over May. The nearly $4 billion figure was about two-thirds of spending during the same holiday in 2019. That was better than recovering to 44% of pre-pandemic levels during a longer holiday in early May, while Shanghai was still closed.
Last week, manufacturing and services business survey data for May showed a rebound from April’s lows. But the data, known as the Purchasing Managers’ Index (PMI), is still in contraction territory.
The rate of contraction is similar to that experienced between February and March, said Bruce Pang, head of macro research and strategy at China Renaissance. Since the decline in economic indicators for the month of April, he said, the latest figures show that the impact of the epidemic is still present in May and the economy remains in its worst position since the second quarter of 2020.
PMI data showed a steady decline in employment action plans.
Pang noted that uncertainty about future income, as well as the risks of quarantine for travelers, affected tourism spending during the recent Dragon Boat Festival.
Even if much of Beijing and Shanghai are not officially closed, apartment buildings or residential neighborhoods can 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 has been closed from May 1 until further notice.
Disclosure: NBCUniversal is the parent company of Universal Studios and CNBC.