Beijing industrial activity slows for third consecutive month

The Caixin Index drops to 50.6 points in February, from 51.5 in January. Domestic and foreign demand fell due to the pandemic. Chinese companies stop hiring. Alarm raised over decline in tax revenues. The burden of debt accumulated by local governments.

Beijing (AsiaNews) - Industrial production in China has slowed for the third consecutive month, a sign that the economic recovery after the peak of the Covid-19 pandemic is still fragile.

The Caixin index on manufacturing activity, published today, reveals that in February, the figure dropped to 50.6 points, from the 51.5 recorded the previous month. Above 50 indicates that the economy is expanding; below this level signals a contraction.

Industrial growth has reached its lowest level since May 2020. Experts expected a firm index at 51.5 points. The demand and supply of manufacturing products have fallen due to the pandemic crisis. The blocking of movements between provinces during the Lunar New Year was a factor in this sense, as were the few orders from abroad.

The employment sub-index, also down for the third consecutive month, confirms the negative picture: companies are not hiring. In the short term, however, analysts expect robust GDP growth (8.5% this year), mainly due to the wait for the coronavirus emergency abroad to be overcome and the consequent growth in exports.

For the long term, the forecasts are less encouraging. Fiscal stimulus plans have burdened the state budget. The rapid aging of the population is a threat to productive growth. In a speech delivered in December, but only made public in recent days, former Finance Minister Lou Jiwei sounded the alarm. He points out that tax revenues will remain low over the next five years while debt continues to grow.

In 2020, public spending increased by 2.8%; the taxes collected fell by 3.9%, the first drop since 1976. The most worrying figure is that of local governments. Lou points out that between this year and 2025 about a quarter of the provinces will have to use half of the revenues to pay off their debts.