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No, or maybe. If you look at the data, the secondary (manufacturing & construction) sector in China has been mostly stagnant. Almost all of their recent growt
by zhdc1 7y ago
No, or maybe.
If you look at the data, the secondary (manufacturing & construction) sector in China has been mostly stagnant. Almost all of their recent growth has come from the tertiary/services sector, which isn't as export focused or tied into the global economy compared to the US or EU.
Manufacturing has been hit - hard, but keep in mind that the quarantines started during the new year holiday, when most factories would be operating at a lower pace or closed entirely. Now that people are actually starting to go back to work (depending on the city, either last week or this week), we'll be able to get a better gauge of the long term effects on industrial production through the end of the crisis.
What's harder to estimate is the impact to services, since it's harder to find solid proxies. A lot of companies are having employees work from home, but not all jobs can be done remotely. There's also the question of whether a significant slowdown here would boil over to the rest of the world.
My guess is that the total damage - assuming a return to normal in the next couple of weeks & that we're only talking about the global economy - will be a lot lower than most people think. A lot of the hit to the secondary sector was already baked in by the Chinese new years, and the tertiary sector isn't as tied in to global markets as the secondary sector. It's also a lot easier to fake #s from services.
It's a different ball game if the status quo doesn't return to something approaching normal soon (e.g., if there's a flare up in cases outside of Hubei now that people are starting to congregate together again). That said, the impact to the local economy is going to be immense anyway, and I wouldn't be surprised if there are follow on effects at some point.
- sjwalter 7y agoLol at saying everyone went back to work last week. Compared to last week, more people are locked down this week, some estimates saying fully 7% of the human population is under some kind of heightened restriction on movement. Here’s TomToms real-time traffic congestion map of Shanghai: https://www.tomtom.com/en_gb/traffic-index/shanghai-traffic https://www.tomtom.com/en_gb/traffic-index/shanghai-traffic Use the 7 day view and compare this week with last year at the same time. Using traffic as a proxy for economic activity and your assertion is clearly a misrepresentation. And Shanghai is not even close to the epicenter! Remember as well that people leave home for the new year celebrations, and so now a huge chunk of people are locked down to their homes or quarantine hospices far from their places of business, plus probably scared as all get out to leave the house, and your thesis about some quick recovery into normalcy seems basically crazy. Further, you’re relying on how much China’s growth has impacted the world economy in the last few years, and you’re right that it’s largely been domestic consumer growth fueling the country. But that is... an irrelevant measure? China’s economy may have gotten more focused on its own consumers for a while, but it didn’t like stop being the world’s factory to open up some web startups and KFCs. How many more days of basically zero containers of parts cause shutdowns of production lines in Detroit? How many of your prescription meds are either wholly made in China or are finished here but with precursors largely sourced from China?
- zenexer 7y agoI think zhdc1 was saying, "now that employees are expected to be back at work"--that is, we're now exiting the time period for which everyone had planned on much of China taking time off. It's hard to gauge the impact when we expected everyone to be out of work anyway. Now that we're past that timeframe, it'll be easier to gauge the long-term impact, especially on foreign companies.
- zhdc1 7y agoThey are starting to go back to work, and we can actually track it to a certain extent (not to the point where we can quantify it, but enough that we can say it's a definite trend).
- zhdc1 7y agoI never said that everyone went back to work, but yes, a large part of the workforce outside of Hubei Province has actually started work again. This is easy to track - factory emissions outside of the worst hit regions (NO2, for instance, is a good proxy) are starting to recover, and social media activity is very clearly indicating 1.) a large number of furloughed workers are happy that they're now going back to the office and 2.) an even larger number of workers are now doing remote work and telecommuting (and hating it). I also never said that the impact of the pandemic to manufacturing is irrelevant, only that 1.) provided that factories are starting up again, which many of them are (and we know this, because we can track how much they're emitting) and 2.) the fact that the pandemic hit over the Chinese New year, will mitigate some of the actual impact of the pandemic to the global economy. Again, all of this assumes that the infection rate in China will continue to slow and that the recent spate of cases outside of China don't escalate to the point where other countries have to implement city-wide quarantines.