China’s business confidence dropped to its lowest in nearly a decade, a survey showed on Monday, pointing to the impact of rapidly rising Covid-19 cases on the country’s economic activity.
The index dropped from 51.8 in November to 48.1 in December, according a World Economics survey of sales managers at over 2,300 companies, conducted between December 1 and 16.
This was the lowest level since the survey began in 2013.
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The survey results are among the first indicators of declining business sentiment in the world’s second-biggest economy, after Beijing’s abrupt easing of rigorous containment rules on December 7 sparked a still-growing wave of Covid cases across China.
“The survey suggests strongly that the growth rate of the Chinese economy has slowed quite dramatically, and may be heading for recession in 2023,” World Economics said.
China’s GDP is predicted to expand by just 3% this year, which would be its poorest performance in almost half a century.
Businesses out of liquidity
The survey revealed a dramatic decline in business activity in December, with the sales managers indexes in Manufacturing and Service Sectors both below the 50 level.
“The percentage of companies that claim to be currently negatively impacted by Covid has risen to a survey high, with more than half of all respondents now suggesting their operations are being harmed in one way or another,” the London-based data provider said.
China has recently made sweeping changes to its zero-Covid policy — the world’s toughest anti-Covid curbs and lockdowns — championed by President Xi Jinping. The measures debilitated the Chinese economy and led to unprecedented public unrest.
Top Chinese leaders and policymakers plan to prioritise stabilising the economy in 2023 and step up policy adjustments to ensure key targets are hit, according to an agenda-setting meeting ended on Friday.
“It may take at least another quarter before things turn around,” said Dan Wang, chief economist at Hang Seng Bank China.
“Many small businesses have run out of liquidity, especially restaurants, gyms, hotels and other city services.”
- Reuters, with additional editing by Vishakha Saxena