China Syndrome

Image source: treety, 4045 - Shutterstock

What's going on?

Yet more data out on Monday showed the toll Chinas lockdowns are taking on its economy.

What does this mean?

Chinas efforts to keep Covid at bay have kept major cities like Shanghai locked down for weeks, and an influx of data on Monday confirmed how bad things have become. Retail sales fell around 11% in April from the same time last year the second-straight month theyve fallen, and almost double the dropoff analysts were expecting. In fact, only sales of medicine, fuel, and food and drink grew from April 2021. Industrial production was down too, dipping for the first time since March 2020. And since the countrys companies suddenly didnt need as many workers, the unemployment rate climbed to 6.1% and unemployment among young people hit a new record.

Why should I care?

The bigger picture: Is China finally reopening?
Some economists now reckon the Chinese economy will grow just 0.5% this quarter, but the more hopeful of them think Aprils data will mark the worst of the slump. After all, the government said its going to let some companies reopen this week, and aims to be back to business as usual by the middle of June. The countrys central bank also cut mortgage rates for first-time homebuyers over the weekend, and optimists reckon there could be more measures to boost the economy on the way.

For markets: Investors welcome their prodigal son.
The prospect that things might only be getting better for the country will give investors even more confidence, after having already sent the Chinese stock market up 2% last week. Its already working wonders on the professionals: analysts at JPMorgan upgraded their ratings on a bunch of Chinese tech companies including Alibaba and Tencent on Monday (tweet this).

Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over one million Finimizers

Read next

Chip Happens

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.