Getting China back to work
As China’s leadership works to kickstart the economy in the wake of the COVID-19 outbreak, the country’s provinces are hustling to get folks back to work. Trivium is tracking the official resumption rates throughout the country – to help folks understand what is happening on the ground. New updates every weekday.
Last update: March 27, 2020
Trivium National Business Activity Index
This index looks at the current state of China’s overall economic capacity utilization as compared with “normal” levels prior to the virus outbreak.
Note:This represents a downward revision from our estimate of 78% on March 24, as updated official data suggest SMEs have slowed resumption rates compared to our previous projections.
How we calculate it
We estimate the currently operating proportion of typical national output by aggregating our in-house resumption rate estimates for large and small enterprises, and weighting the two indices by their proportion in overall GDP (for more information see our notes below).
Trivium National Large Enterprise Activity Index
This index estimates current production levels at China’s large industrial and manufacturing enterprises as a proportion of normal activity levels.
How we calculate it
We produce our proprietary resumption index for large enterprises by tracking public reporting of provincial resumption rates, then adjusting for the weight of each province in national GDP and for estimated average capacity utilization rates among these enterprises.
Trivium National SME Activity Index
The Trivium National SME Activity Index estimates current production levels at China’s SMEs as a proportion of normal activity levels.
Note:This represents a downward revision from our estimate of 78.1% on March 24, as updated official data suggest SMEs have slowed resumption rates compared to our previous projections.
How we calculate it
We produce our proprietary index for SME resumption rates by cross-checking official SME resumption rates against our on-the-ground channel checks and anecdotal research, and adjusting for estimated average capacity utilization rates.
The latest policy developments
Over the past two weeks, the central government has rolled out a spate of policy measures focused on getting the economy back up and running. As they have done so, it has become clear in recent days that the government has trained its attention on stabilizing support for four key areas of the economy, including:
- Logistical services
- Consumer purchases
- Inbound foreign investment
- Bank liquidity
On the logistics front, Premier Li Keqiang pushed to revive China’s logistics networks with a visit to Beijing Capital Airport as well as the airport distribution center of SF Express, on March 6. According to state media:
- “Li emphasized [the] vital importance for the orderly resumption of [logistics] work, and stressed the need for unimpeded transportation…to keep the industrial chain smooth and running.”
- He also urged greater cooperation with foreign governments and international organizations to prevent the spread of disease by air transport.”
On the consumer front, 23 ministries released a joint plan to facilitate consumption on March 23. The measures include:
- Optimizing domestic market supplies by enhancing the competitiveness and establishment of domestic brands
- Improving supplies of imported goods through preferential tax policies
- Promoting and upgrading the culture and tourism industries
- Integrating urban and rural consumption networks
- Strengthening logistics infrastructure construction
- Accelerating the establishment of an ecosystem for internet-based consumption
- Improving workforce education to realize consumption potential
- Stabilizing and increasing people’s income
- Strengthening supervision and regulation of market order
- Establishing a social credit system for consumption
- Shifting policies restricting automobile purchases to policies that restrict automobile use
- Encouraging localities to increase quotas for automobile purchases
- Accelerating the construction and commercial application of 5G network infrastructure
On the employment front, at a State Council meeting on March 17, Li Keqiang made it crystal clear that stabilizing employment is the top priority and that the government should let people get back to work as soon as possible, saying:
“Unreasonable restrictions that hinder the resumption of work should be lifted to let more workers get back to work and make money as soon as possible.”
On the liquidity front, the central bank cut banks’ reserve requirement ratios (RRRs) by 50-100 basis points on March 16 – injecting RMB 550 billion into banking system. On the same day, the central bank injected RMB 100 billion through the medium-term lending facility.
Key takeaways as of March 27
- The vast majority of businesses in China have at least turned the lights back on – with 94% of large companies having resumed operations.
- 23 provinces are reporting full resumption rates (of between 99-100%) for large businesses. These provinces account for 87.2% of GDP. An additional five provinces have large business resumption rates above 90%. That said, capacity utilization at many of these companies is still closer to 80% of normal levels, with many far below that.
- Overall, then, industrial enterprises appear to be operating at 80.1% of normal activity levels. This is an impressive pace of normalization given that our estimate stood at just 53.7% exactly one month ago.
- SMEs are coming back to life. We estimate that small businesses are now operating at 71.4% of their normal activity. This is a vast improvement from just 59% two weeks ago.
- The uncertainty around demand is now the key variable for all businesses – both large and small. Over the past four weeks, government efforts have been geared toward normalizing production and reducing supply disruptions. Now, the key goal will be to support consumption – by households and business alike – so that full scale operations can be achieved.
You might also be into our daily email newsletter on Chinese policy developments.
Breaking things down by province
- Provinces with 100% resumption rates, or right at that level, account for 87.2% of GDP.
- The export powerhouses in the southeast part of the country appear to be running quite close to full tilt.
- Provinces with resumption rates of 90% or above now account for 94.7% of GDP.
That said, these official resumption rates do not take capacity utilization into account, as we have noted regularly, so they should be read with some caution.
|Province||Provincial GDP (% of national)||Reported resumption rate*||Contribution to national resumption rate|
Total national resumption rate for large enterprises: 96.6%
*Reported resumption rates, issued on an ad hoc basis, have been extrapolated to provide daily updates
- For the past several weeks, provincial governments have been publishing resumption rates for industrial enterprises with revenues of RMB 20 million a year and above.
- These numbers indicate the percentage of companies that have resumed operations since the Chinese New Year holiday. These numbers are reported irregularly and on an ad hoc basis, so we have collected them over time and extrapolated daily resumption rates based on the officially reported provincial numbers.
- We have weighted the calculated resumption rates by provincial shares of national GDP to aggregate our national resumption rate for industrial enterprises with revenues of over RMB 20 million.
- Given that the provincial resumption rates do not account for capacity utilization (i.e. a business is counted as “resumed” if it is operating at 33% of normal capacity) we have further adjusted the national resumption rate by taking estimated average capacity utilization for such enterprises (which is also reported in an ad hoc manner) into account to produce our National Large Enterprise Activity Index.
- In addition, the Ministry of Industry and Information Technology and the State Council have been publishing resumption rates for small and medium-sized enterprises on an occasional, ad hoc basis. We have taken these publicly reported rates and adjusted for anecdotal evidence we have gathered on SME operations as well as estimated average capacity utilization rates in order to calculate our National SME Activity Index.
- For our National Business Activity Index, we combined our large and small company indices, weighted by their proportion in GDP (40% for large companies and 60% for SMEs).