In late February, the owners of a Chinese industrial pipe company worried about local orders being canceled after manufacturing and retail operations in the country were closed, exhausting the world’s second largest economy.

But less than a month later, domestic orders are beginning to accelerate and factories across China are operating with near maximum capacity. But now, they have a new interest.

Challenges to international demand

The policy of shutting down Chinese paralyzed shops and businesses is now being replicated in many parts of the world, as countries try to handle the spread of the Covid-19 pandemic that is attacking the lifeblood of China. global economy.

Jason Cheng, overseas sales manager of Rifeng, an oil company in China, said: “We have re-operated 100% of capacity for overseas demand, but sadly, markets in other countries are closed or about to close, ”he said, adding that customers in France, Italy and the United States have issued requests to delay payment or cancel orders.

"We had a similar situation in 2008 and 2009, and at that time overseas sales were only half that of the previous year," Cheng said. "I am sure there will be a similar story happening now."

Many in China are currently preparing for a second economic sho‌ck following the corona virus pandemic, crippling all the country’s activities for the first two months of the year.

The initial supply sho‌ck caused Chinese manufacturing plants to be unable to operate, but economists are now more worried about the next supply demand sho‌ck that rocked the economy in the next month.

With policies attempting to stem the spread of the corona virus, it is likely that China’s export industry - accounting for 20% of the country’s economy - will be affected. Customs data shows that China’s exports fell 17.2% in January and February, analysts warned that the worse may be ahead.

The economist of the International Monetary Fund wrote in an article released on Friday that, as many countries faced the outbreak of pandemics and chaos in global financial markets, people Consumers and companies may remain vigilant, and it will reduce global demand for Chinese goods when the economy is operating again.

For example, the situation in the US is now deteriorating so rapidly that Morgan Stanley economists have changed their projections from a 4% economic forecast in the second quarter to a record low of 30, 1%, within a week only.

Analysts said the average unemployment rate would be 12.8% in the quarter, with consumption falling by 31%.

Confidence in domestic consumption declined

The second part is the story of domestic demand. A series of bankruptcies emerge from the ghost of the corona virus and the weekly shutdown of the Chinese economy. 100 real estate companies filed for bankruptcy in January and February, according to Bloomberg.

Meanwhile, last Monday, the unemployment rate in China surveyed increased from 5.2% to 6.2%, equivalent to 5 million people lost their jobs. This figure does not include immigrant workers.

Beijing-based research firm Gavekal Dragonomics has estimated that corona virus could cost Chinese immigrant workers 800 billion yuan ($ 115 billion) in wages.

These figures will create a new gap in domestic demand at a time when retail sales fell by 20.5% in January and February, a record decline.

Michael Pettis, a finance professor at Peking University, said: “I doubt that, although the supply side restrictions will be eliminated quite quickly, the demand for economic recovery will be much harder and this will be so severe that even people who don’t lose their income will respond to the sho‌ck by deciding to save more and spend less from their income. ”

Biggi Stefansson, owner of IS Seafood, an Icelandic seafood distributor in China, said his business saw a 94% drop in sales in February compared to the same period last year. He hopes that the situation in March will be a bit better for the Shanghai-based company, which could be only 80% lower than last year and even in April, his business will still be reduced by 50% .

The same thing happened in Beijing, where USource meat supply and distribution company experienced a 90% drop in sales from its business in February. By March, the company could still suffer a loss of 50 % compared to last year.

William Kerins, who runs the company with his wife, Danielle Yang, said: “Market demand will gradually recover. But this year’s growth in demand is a far cry. ”

These trends have come up in a recent survey conducted by Beijing’s finance company Rong360.com, showing that 64.4% of people surveyed will keep their savings spending habits. after the pandemic, and 31.4% of people did not change their spending habits.

From what we can see, consumer confidence is rising but cannot be increased by the level before the crisis, Josh Gardner, founder of online market management Kung Fu Data, added that trade Electronics has grown bigger than traditional stores, especially food, medical supplies and home fitness equipment.

The Chinese economy was expected to recover in a V-shaped graph, meaning the Chinese economy will recover at the same rate as when it plunged. But now, declining consumer confidence and the challenges of international demand make this hope far-fetched.

Most economists today expect the Chinese economy to plummet this quarter, perhaps the first record decline since 1976, at the end of the Cultural Revolution. A global recession is also likely, and with the danger posed by the corona virus, the threat to the Chinese economy shows no sign of abating.

China will not be the only country facing a prolonged recession, but perhaps it has more to lose than most other countries.