China's Economic Woes Continue
FROM TODAY'S BLOOMBERG.COM
It can’t be an easy time to be a Chinese factory owner. At the turn of this year, with a trade deal with the U.S. about to be signed, the future looked brighter. The global economy seemed to be stabilizing, and the great slowdown in China was under control. Then the coronavirus erupted in Wuhan, and the world changed again.
A painstaking process of restarting production after weeks of shutdowns across the country is making progress, according to a range of energy, travel and output indicators.
For example, demand for coal to make electricity this week was the highest it’s been since Jan. 21, but it’s still about 20% below where it was this time last year or in 2018.
Bloomberg Economics estimates that the Chinese economy was operating at 80% to 85% of normal capacity as of Friday.
But the workshop of the world looks to get walloped again. The global economy is shutting down by the day, as the viral outbreak spreads to China’s biggest customers — the developed markets of Europe and the U.S.
Manufacturing companies across China told Bloomberg News that the emerging challenge now is demand, not supply. “We are actually more worried about the development of the epidemic in Europe and the U.S., which will affect their domestic consumption,” says Mark Ma, owner of Seabay International Freight Forwarding Ltd. in Shenzhen.
The double whammy means China is facing its first quarterly economic contraction in decades and the weakest year since the early 1990s.
“The feedback loop is emerging,” said Trinh Nguyen, Hong Kong-based senior economist at Natixis. “As China recovers and resumes its supply chains, it will be hit by demand shocks from its own subdued demand and an increasingly infected world.”
—Jeff Black in Athens
Charting the Trade War
Today’s Must Reads
· North of the border | Canadian officials are looking for reassurance from the U.S. that the border between the countries will remain open despite fears over the spread of coronavirus.
· Pig out | Chinese buyers canceled a record amount of U.S. pork last week after imports were piling up at the Asian giant’s ports amid the coronavirus outbreak.
· No face time | Next week’s negotiations in London between the U.K. and European Union over their post-Brexit relationship have been called off because of the coronavirus — and they still are far apart on key issues.
· Earth movers | In a further indication of the stress rippling through the construction and mining sectors, Caterpillar reported its biggest decline in global machine sales since the end of 2016.
· Farm aid | South Africa raised tariffs on poultry imports, in a move to protect local producers who’ve sought measures to counter a flood of cheap shipments.
Coming Up
· March 17: Japan trade balance
· March 18: EU trade balance
Like Terms of Trade?
Don’t keep it to yourself. Colleagues and friends can sign up here. We also publish Balance of Power, a daily briefing on the latest in global politics.
For even more: Subscribe to Bloomberg All Access for full global news coverage and two in-depth daily newsletters, The Bloomberg Open and The Bloomberg Close.
How are we doing? We want to hear what you think about this newsletter. Let our trade tsar know.