China’s cautious economic reboot is warning for world

May 15: China has a lesson for the world: An economy is harder to reboot than it is to shut down.

Fresh data for the month of April, covering a period when the government pushed hard to reopen the economy as the coronavirus came under control, show that retail sales continue to fall as consumers shun restaurants and curb spending on other nonessential items.

While factory output rose for the first time since the virus struck and state investment improved, private investment remained anaemic. Worryingly for manufacturers who are already battling deflation and a slump in global demand, inventories are stacking up as supply outstrips demand.

The data underscore that China's economic recovery will be gradual, with little sign of the kind of snapback some had expected when the crisis began. It also suggests a revival led by supply will create excess capacity and disinflation unless demand soon catches up--both at home and abroad.

"Unlocking the economy is a more challenging and complex task than locking it down," said Chua Hak Bin, a senior economist at Maybank Kim Eng Research Pte in Singapore.

China's experience is sobering for governments seeking to ease virus-related curbs in the hope of offsetting the deepest recession in decades. Policy makers, including Federal Reserve chairman Jerome Powell and International Monetary Fund managing director Kristalina Georgieva, have warned that recovery is still a way off.