Chinese business confidence drops to its lowest level in nearly a decade due to COVID

BEIJING (Reuters) – Business confidence in China fell to its lowest level since January 2013, a survey by the World Economic Foundation showed on Monday, reflecting the impact of rising coronavirus cases on economic activity with the sudden lifting of many epidemic control measures.

The index fell to 48.1 in December from 51.8 in November, according to a World Economics survey of sales managers at more than 2,300 companies conducted Dec. 1-16. The index was the lowest since the survey began in 2013.

The survey results were among the first indications of how business sentiment is affected in the world’s second-largest economy, after a sharp easing of strict COVID-containment measures on December 7 triggered a still-growing wave of localized COVID-19 cases across China.

“The survey strongly indicates that the growth rate of the Chinese economy has slowed very significantly, and may be heading towards recession in 2023,” Economics said.

China’s GDP is expected to grow just 3% this year, its worst performance in nearly half a century.

The survey showed that business activity fell sharply in December with sales managers’ indices in both the manufacturing and services sectors below the 50 level.

“The percentage of businesses claiming to be currently negatively affected by COVID has risen to a high level, with more than half of all respondents now indicating their operations are being affected in one way or another,” said the London-based data provider.

China recently dismantled some key parts of the world’s strongest anti-COVID restrictions and lockdowns. President Xi Jinping endorsed the measures, but they have weakened the economy and sparked popular protests unprecedented in his decade-long rule.

Senior leaders and policymakers will focus on stabilizing the economy in 2023 and ramping up policy adjustments to ensure key targets are met, according to the agenda-setting meeting that ended on Friday. Read more

“It may take at least another quarter before things change,” said Dan Wang, chief economist at Hang Seng Bank in China.

“Many small businesses have run out of cash, especially restaurants, gyms, hotels and other city services.”

Additional reporting by Liangping Gao, Ryan Wu, and Joe Cash; Editing by Stephen Coates and Christian Schmollinger

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