Many Chinese factories have faced a labour shortage as migrants have been unable to return to work

because of the coronavirus outbreak. Photo: AFP

The damage caused by the
coronavirus outbreak
to China’s US$14 trillion economy could be much worse than Beijing hoped, as official measures for the
country’s factory and service activity indicated on Saturday, threatening President Xi Jinping’s vision for 2020
and underscoring his urgent appeal to get production back to normal.

Monthly economic indicators for February sank to all-time lows as the coronavirus halted China’s
manufacturing machine and froze activity in the service sector – from retailing to recycling – painting a bleak
picture of the world’s second-biggest economy and challenging Beijing’s repeated assurance that the impact
would be manageable and short-lived.

Covid-19, the disease caused by the coronavirus – was first reported in Wuhan in December. Since then it has
spread to more than 50 countries and more than 85,000 people have been infected. The outbreak has disrupted
travel and cargo shipments, and caused stock markets to slump.

China’s official February purchasing managers’ indexes (PMI) for both manufacturing and services, released
by the National Bureau of Statistics on Saturday, confirmed fears that China’s economy was in bad shape and
fanned speculation that it may even contract in the first quarter.
Larry Hu, chief China economist at Macquarie Capital in Hong Kong, said in a note that Beijing might report
negative growth for “the first time since the Cultural Revolution”.

The manufacturing PMI, which measures factory activity, dropped to 35.7 in February – below the previous
all-time low of 38.8 set in November 2008 during the global financial crisis – from 50 in January when the
impact of the epidemic was not apparent.

A reading below 50 indicates a contraction in activity.

The February PMI figures confirmed fears that China’s economy was in bad shape. Photo: AFP

All of the sub-indexes of the PMI pointed to the difficult situation facing Chinese factories. Output plummeted,
new orders vanished, exports and imports stopped, and logistics were badly disrupted. Input prices, which
reflects the costs factories must pay, was the only sub-index that remained above 50.

The non-manufacturing PMI – a gauge of sentiment in the services and construction sectors – also dropped, to
29.6 from 54.1 in January. This was also the lowest on record, beating the previous low of 49.7 in November
2011, according to the China Federation of Logistics and Purchasing, which produces the index with the
National Bureau of Statistics.