China’s manufacturing and service economies both showed marked slowdowns in April.

The country’s official purchasing managers index (PMI) in manufacturing slipped from 49.5 in March to 47.4 in April, its lowest mark since February 2020, due in significant part to widespread, severe lockdowns to halt the spread of the COVID virus that began in late March.

Readings above 50 indicate growth; ratings below 50 indicate contraction.

The subindex measuring factory output chunked down from 48.8 in March to 44.4 last month.

Because of the restrictions, the export orders subindex plunged from March’s 47.2 to 41.6 last month.

Regions without COVID infections or shutdowns also have been stymied. Locked-down districts or cities typically bar entry from outsiders or exit by those inside, paralyzing logistics.

Factories with unrestricted workers still have been forced to close because they lack materials; finished products are stockpiled in warehouses, unable to be moved to their destinations.

The service sector’s PMI went from 46.7 in April to 40.0 in March. Construction’s index was 58.1 in March but fell to 5.27 over the following month.

TREND FORECAST: China’s PMIs signal economic contraction while inflation continues raising prices around the globe. That defines Dragflation, our Top 2022 Trend that combines rising prices and declining economic production.

The U.S., parts of Europe, and now China have entered a Dragflationary cycle and will pull the rest of the world’s economies down with them. 

As China slows down, so too are imported products and sales from companies doing business in China. Just today, Starbucks suspended its outlook for fiscal 2022, blaming China’s Zero COVID policy lockdowns that have brought down its international sales.


China’s extremist anti-COVID policies have locked millions of residents into their homes or workplaces for weeks, shutting down ports and subjecting an estimated $22 trillion worth of goods to months of disruption in manufacture and distribution, Bloomberg reported.

As of 27 April, 230 container ships were stuck in Shanghai’s port or moored nearby, 35 percent more than a year earlier. 

By 18 April, containers arriving in Shanghai’s port from abroad waited an average of 12 days to be put on a truck and taken inland, compared to 4.6 days before the lockdown.

China’s freight airports and rail yards also are snarled.

Tesla reports losing about a month’s worth of work because of Shanghai’s complete halt. Bed Bath & Beyond Inc. noted an “abnormally high” level of inventory was in transit or frozen in ports. Car parts maker Continental AG revised its 2022 growth forecast, putting it at 4 to 6 percent this year, down from the 6 to 9 percent it had envisioned before China stopped everything.

After tech-centric city Shenzhen shut down for a week, “many sellers are suffering a one-month delivery delay,” Wang Xin, president of the 3,000-member Shenzhen Cross-Border E-Commerce Association, said in a comment quoted by Bloomberg.

It now takes an average of 111 days for goods to travel from an Asian factory’s gate to a U.S. warehouse, almost the record 113 days set in January and more than twice as long as in 2019, freight forwarder Flexport said. To Europe, the trip takes 118 days.

“We expect a bigger mess than last year,” Jacques Vandermeiren, the Port of Antwerp’s CEO, told Bloomberg. “It will have a big negative impact for the whole of 2022.”

Antwerp is Europe’s second busiest container port.

“Once product export activities resume and a large volume of vessels make their way to U.S. West Coast ports, we expect waiting times to increase significantly,” Julie Gerdeman, CEO of supply-chain research firm Everstream Analytics, said in a Bloomberg interview.

“This has accelerated the pressing need for supply chains to become more regional,” Lorenzo Berho, CEO of Mexican building firm Vesta, said in a press briefing last month. “Globalization as we know it may be coming to its end.”

In a late April speech, Christine Lagarde, president of the European Central Bank, cited a recent survey reporting that 46 percent of German manufacturers depend heavily on China for parts and materials. Among those firms, almost half are planning to reduce that reliance, she noted.

Russia’s invasion of Ukraine means that supply chains need to be reorganized around geopolitical alliances, not around low bidders, Lagarde said.

Instead of “offshoring” or “onshoring,” U.S. treasury secretary Janet Yellen has begun talking about “friend-shoring,” the idea of strengthening trade ties with reliable geopolitical allies.

Rejiggering supply chains to make them less global “might cost more, but if you can make smaller quantities that you can then sell at closer to full price, you can actually completely change the game,” Brian Ehrig, a partner at the Kearney consulting firm, said to Bloomberg.

In a study published last month, Kearney found that 78 percent of CEOs are considering reshoring supply lines or already have. 

“Globalization will never die,” Shay Luo, co-author of the Kearney survey, said. “However, it will evolve to a different form.”

TRENDPOST: The idea of breaking old trading relationships and refashioning them with companies in countries that are geopolitical allies aligns with our Top 2022 Trend of Self-Sufficient Economies.

Not every country will be able to be entirely self-sufficient in meeting all of its needs for food, raw materials, and finished goods. The next-best thing is to form supply lines to and from areas that are linked not only by financial transactions, but also by geopolitical alliances.


The renminbi, China’s day-to-day currency, sank about 4.2 percent in April to 6.6 to the dollar, its steepest drop since 2005 when China’s currency disassociated itself from the U.S. dollar.

The decline’s pace accelerated late in the month when Chinese president Xi Jinping declared an “all-out” infrastructure spending plan to offset the economic damage of the country’s current draconian anti-COVID lockdowns.

“That was a signal that the government is going to have to do more than they’d planned on to come close to their 5.5-percent growth target for this year,” Moody’s chief Asia-Pacific economist Steve Cochrane told the Financial Times.

The announcement of yet more infrastructure spending boosted China’s stocks but did little to buoy the currency.

Each morning, China’s central bank sets a range within which it will allow the renminbi to trade. Last week, it set the range lower than expected, deciding to allow the currency to weaken.

“A weakening renminbi will be positive for the export-based economy and that may be partly behind the lack of further policy moves to rein in the exchange rate,” Cochrane said.

The renminbi also has been weakened by foreign investors withdrawing their funds and transferring them to U.S. assets after the dollar’s value exceeded the renminbi’s last month for the first time in a year, the FT noted.

TREND FORECAST: As we have noted in our article DOLLAR: “WE’RE #1”, the dollar is strong because other currencies are weak. In effect, China is destroying its currency and economy as a result of the draconian lockdown it has imposed on its major cities. 


China’s economy “is in the worst shape in the past 30 years, semi-paralyzed” by “draconian” anti-COVID policies, Weijian Shan, co-founder and chair of PAG Group, one of Asia’s largest private equity firms, said in a meeting reported by the Financial Times.

“The market sentiment toward Chinese stocks also is at its lowest point in the last 30 years,” he added, and “popular discontent is at its highest point in the last 30 years.”

The $50-billion fund is being “extremely careful” about its investments in China and is actively diversifying into other countries, Shan said.

“China feels to us like the U.S. and Europe in 2008,” he said, a time when the Great Recession was setting in.

China’s widespread, severe anti-COVID lockdowns have sunk world trade, re-tangled supply lines, and sparked a recent sell-off in Chinese stocks.

In addition, Chinese regulators came down hard on the tech sector last summer as part of president Xi Jinping’s “Common Prosperity” program, which seeks to reduce economic disparities among people.

The new round of regulatory oversight has caused some market players to consider China “uninvestable” because of capricious government dictates, according to the FT.

Shan’s comments came in a meeting with brokers discussing PAG’s plan for an initial public stock offering in Hong Kong, the FT said.

If it takes place, the offering is expected to be the city’s largest so far this year, valued at as much as $15 billion.

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