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China’s Clogged Roads Show Economic Recovery Gathering Pace

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(Bloomberg) — China’s economic activity accelerated in February as many residents returned to work after an extended Lunar New Year break, clogging roads in major cities and spending more at restaurants and shops.

Congestion in major cities last week was the worst since at least the start of 2022, according to data compiled by BloombergNEF and Baidu. The number of people riding the subway in Beijing, Shanghai, Chongqing and other major cities was back to or above pre-pandemic levels.

UBS Group AG’s latest China consumer survey, released Tuesday, showed an increase in dining out, shopping in stores and offline entertainment.

Yet the rebound is proving to be lopsided. Sales of big-ticket items, like cars and homes continue to decline, reducing demand for commodities like steel, and exports are likely to slump further. That suggests China’s post-Covid recovery is being led by industries like retail and services, and the industrial sector will remain subdued.

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“The property slump is the biggest hurdle for the cyclical recovery of China’s economy,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd.

With consumption during the Lunar New Year holiday still only about 70% of the levels reached in 2019, there’s “a big gap to catch up,” he said. “It’s hard to expect a sharp rebound in consumption in the absence of a clear improvement in the job market,” he said.

Data Gaps

China unexpectedly dropped its Covid restrictions late last year and stopped reporting infection numbers, making it difficult to assess the impact of the outbreak. The National Bureau of Statistics also doesn’t publish official economic data in the first two months of each year because of distortions from the Lunar New Year holiday, which falls on a different day each year.

Analysts are increasingly turning to alternative indicators, such as mobility data to assess economic activity.

With many workers able to return to their hometowns for the first time in three years, travel over the 40 days of the Lunar New Year holiday was a bumper one. There were 1.6 billion trips made nationwide, 51% higher than last year but still 47% below the 2019 level, according to government data.

Last week, railway passenger traffic in the Yangtze River Delta, which includes Shanghai and economic powerhouses such as Jiangsu and Zhejiang, surged above pre-pandemic levels as university students returned to college, the government said.

Car Sales

On the production side, the picture is more subdued. Car output and sales both fell more than 30% in January from a year earlier, hit by longer than normal shutdowns of many production lines and dealership, as well as the end of subsidies for electric vehicles.

Read more: China Car Sales Drop Amid Weaker Buying Over Lunar New Year

The slump in the housing market also shows no sign of easing, with home sales by the top hundred developers falling about 33% last month.

That decline has hit demand for steel, cement and other goods. Steel output is flat this year while stockpiles have risen, according to data from the Iron and Steel Association. However, demand for some other commodities like oil and copper is starting to pick up.

Michelle Lam, Greater China economist at Societe Generale SA, expects the housing market to recover in the second quarter of the year as the policy support from the government and central bank since late last year starts to kick in.

That underpins her forecast of a 9.7% rebound in retail sales this year, which is well above both the 0.2% decline in 2022 and the median forecast for a 7.3% increase.

Trade Decline

Global trade is another dark cloud over the economy. Shanghai port, which is the world’s busiest container port, saw a 13% drop in containers processed last month. South Korea’s exports to China for the first 20 days of this month fell almost 23% after declining 31% in January.

Japan’s exports to China fell 17% last month, the worst decline since the same month in 2019, and reaching less than 1 trillion yen ($7.5 billion) for the first time since January 2020.

The slump in trade has continued to flow through to shipping costs, which are almost back to where they were before the pandemic.

–With assistance from Fran Wang.

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How petro-nations are approaching the shift to net zero and the future of oil – CBC.ca

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Sudan’s vital date industry struggles in war-decimated economy

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Prices have collapsed in the vital date industry, the latest economic sector to become a casualty of war in the northeast African country.

Every autumn, until this September, date farmers in northern Sudan pulled their harvests down from palm trees, securing a living for months to come.

But five months into the war between Sudan’s rival generals, the country’s economic infrastructure has been destroyed and “buyers are scared”, farmer Al-Fatih al-Badawi, 54, told AFP.

Sudan is the world's seventh-largest producer of dates, growing more than 460,000 tonnes per year, according to the United Nations
Sudan is the world’s seventh-largest producer of dates, growing more than 460,000 tonnes per year, according to the United Nations © ASHRAF SHAZLY / AFP

Sudan is the world’s seventh-largest producer of dates, growing more than 460,000 tonnes per year, according to the United Nations Food and Agriculture Organisation.

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How much of that figure will be available this year remains to be seen, but farmers in northern Sudan are lucky they could manage a harvest at all.

In Karima — a town on the Nile River about 340 kilometres (210 miles) north of the capital Khartoum — the groves bustle with young men climbing date palms, dropping bunches of the brown fruit, beloved by Sudanese, onto white sheets below.

Farmers who depend on the date industry face colossal challenges moving their products across the country, as do those in other agricultural sectors.

Dates and other agricultural products were a foundation of Sudan's pre-war economy
Dates and other agricultural products were a foundation of Sudan’s pre-war economy © ASHRAF SHAZLY / AFP

Along with insecurity, wartime fuel shortages have severely hindered the ability to transport goods.

Before the war, nearly all trade in highly centralised Sudan went through Khartoum.

But constant air strikes, artillery blasts and street battles have left the capital largely off-limits to traders, who fear for their safety or are turned back by fighters at checkpoints.

“Our main market was Khartoum”, Badawi said. Without it, trade is at a standstill and the price for his crop is in freefall.

Land left fallow

In Sudan, one of the world’s most underdeveloped countries, dates and other agricultural products were a foundation of the pre-war economy.

The agriculture sector employed more than 80 percent of the workforce and accounted for 35 to 40 percent of gross domestic product, according to the United Nations.

But now, in much of the country including southeastern Gedaref state, known as Sudan’s breadbasket, the land has been left fallow.

Processing factories have been razed or looted
Processing factories have been razed or looted © ASHRAF SHAZLY / AFP

Processing factories have been razed or looted.

Smallholder farmers have no access to financing, traders have no guarantees of viable markets and industry heavyweights have given up.

In May, Haggar Group — one of the agriculture sector’s largest employers — suspended operations and laid off thousands of labourers.

Even before the war began, one in three people were in need of humanitarian aid and the country’s farmers — unable to meet domestic food security needs — struggled to break even.

The date sector in Karima had been in urgent need of “guidance and agricultural policy”, as well as resources to reduce high rates of waste, said Al-Jarah Ahmed Ali, 45, another farmer.

Now the challenges have only worsened.

Since April 15, fighting between army chief Abdel Fattah al-Burhan and his former deputy, Mohamed Hamdan Daglo, commander of the paramilitary Rapid Support Forces, has torn Sudan apart.

Fighting has killed nearly 7,500 people, according to a conservative estimate from the Armed Conflict Location & Event Data Project.

More than 4.2 million people — most of them from the Khartoum area — have been displaced within Sudan, and another 1.1 million have fled the country, according to the International Organization for Migration.

Farmers are among those fleeing Sudan's deadly war and struggling economy
Farmers are among those fleeing Sudan’s deadly war and struggling economy © ASHRAF SHAZLY / AFP

Agricultural workers are among those joining the exodus, and while they may find relative safety in northern Sudan, whether they can earn enough to survive in a collapsing date market is questionable.

Among them is Hozaifa Youssef, a 26-year-old radiologist who left Khartoum to rejoin his family in Karima, where he is helping with the date harvest.

“I was going to India to get my master’s degree,” but that goal is now on hold, Youssef said.

The veteran farmer, Badawi, has not lost hope.

“We’re trying to find new markets, even though it’s going to be more expensive. Hopefully, the price will adjust and it will all work out.”

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China’s Global Travelers Pull Back as Economic Uncertainty Grows

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(Bloomberg) — More Chinese travelers are delaying outbound plans amid economic uncertainty, according to a new survey, potentially rough news for countries depending on one of the world’s biggest source of tourists.

A September survey by consultancy Oliver Wyman found that 54% of respondents — all experienced travelers who had been abroad before the pandemic shut Chinese borders — said they planned to travel in 2023, down from 62% polled in June.

Some 22% said they didn’t have plans to venture overseas for the next three years, up from just 6% in June.

Respondents needed to meet a minimal monthly household income of 30,000 yuan ($4,105), representing the country’s middle class — a key driver being counted on to help boost China’s post-Covid consumption recovery. While spending on experiential services like travel and eating out has been resilient this year, questions have risen about whether that’s sustainable.

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“While Chinese travelers are returning, it’s taking longer than we expected when the border reopened,” said Imke Wouters, an Oliver Wyman partner who led the research.

The survey also showed 32% of respondents saying their willingness to travel abroad had decreased amid the current economic downturn and political situation, while only 19% said they were more inclined to take international trips.

Enthusiasm for domestic travel remained strong, meanwhile, with 35% saying they were more disposed to journey within China, and just 14% decreasing.

China’s economy picked up steam in August as a summer travel boom and stimulus push boosted consumer spending and factory output, adding to nascent signs of stabilization. Still, the upcoming 8-day Golden Week holiday will be another test of whether Beijing’s recent efforts to bolster the economy are starting to bear fruit.

More than 21 million people are expected to fly during the holiday, starting from this Friday, sending airfares climbing. Domestic tourism spots — and short-haul Asian destinations such as Thailand, Japan and Korea — are among the top choices.

Read more: Millions to Take to Skies as China Gears Up for Long Golden Week

And it’s not just travel: the middle class’s worries about the economy may also be reflected in their luxury expenditures. Of the casual luxury shoppers polled by Oliver Wyman — those who spent less than 40,000 yuan this year — 16% expected to increase their luxury spending, while some 30% considered cutting back.

Big spenders — people who spent more than 40,000 yuan — remained more resilient and positive.

©2023 Bloomberg L.P.

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