While more than 80% of large firms in China have started to resume operation since the last two weeks according to official numbers, the economy shows little sign of recovery.
According to a recent report by China Beige Book based on its independent survey of more than 3,300 Chinese businesses every quarter, the primary indicators for Q1 have dropped to their lowest level in nearly a decade.
Sector wise, services suffered the most in Q1 — with almost half of businesses expecting a quarter-on-quarter decline of more than 10% in sales volume with close to a third making the same projection, the firm said.
“Crucially the results continued to deteriorate into mid-March when most firms were re-opening and supposedly ‘back to work,’” the report says. “Nationally, our revenue index plunged to -26 this quarter while profits dove in tandem, to -22.”
Smaller firms, unlike the large ones, have problems returning to operation in China. According to official numbers, around 60% of them have been able to resume working.
The China Beige Book said it’s “not unreasonable” that the GDP will shrink 10% to 11% in Q1, even with a slight upturn in the last few weeks of this month.
In addition, the China Beige Book’s Q1 brief found that all eight regions of the country and every sector saw their workforce contract.
While the survey results on employment are not as bad as anticipated, particularly among smaller companies, China Beige Book said the economic condition could either be a “solid reversal” in Q2 or in a situation that requires much more government intervention.