China services activity contracted in December as Covid-19 cases surged
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Patients lying on beds in the emergency department of a hospital in Shanghai on Wednesday, amid a Covid-19 outbreak in the city.
PHOTO: REUTERS
BEIJING – China’s services activity contracted at a slower pace in December as surging Covid-19 infections following the reversal ofthe government’s zero-Covid policy disrupted economic activity.
The Caixin China General Services Purchasing Managers’ Index was 48 in December, according to a statement from Caixin and S&P Global on Thursday.
That was not as steep as November’s fall to 46.7, but it was still below the 50 level that separates expansion from contraction. The figure was also better than the expectation of a 46.8 reading from economists in a Bloomberg survey.
The abrupt abandonment of strict Covid-19 controls in early December fuelled rising infections in major cities, disrupting business activity and prompting people to stay home.
New business decreased for a fourth month, although at a slower pace than in November, according to the Caixin and S&P Global statement. New export business declined for the second time in three months, according to a statement on the index.
Even so, “service providers expressed strong confidence in an economic recovery” following the end of zero-Covid, Caixin Insight Group senior economist Wang Zhe said in a statement.
While the worst may be over for some places as activity starts to pick back up, the virus is still spreading fast in some cities and the countryside. A likely travel rush during the Chinese New Year holiday period in late January could see another spike in cases, inflicting further economic pain in the first quarter.
“In the short term, infections are expected to explode, which will disrupt production and everyday life,” Mr Wang said. “How to effectively coordinate Covid-19 controls with economic and social development has once again become a crucial question.”
Broader gauges of the non-manufacturing and manufacturing sectors released by the National Bureau of Statistics also showed weakness in the economy in December. Those indexes fell in December to the worst level since February 2020, when the coronavirus first hit the nation. BLOOMBERG
