A boy undergoes a PCR test in Shanghai on March 13, 2022. Photo: Xinhua

The Chinese economy is expected to improve late in the second quarter when the central government’s supportive measures start showing effects, according to a group of mainland academics and researchers. Markets, however, aren’t so sure judging by the ongoing sell-off amid indications a wider Covid lockdown is on the cards.

China’s manufacturing purchasing managers’ index (PMI) fell to 47.4% last month from 49.5% in March. It was the second consecutive month the figure dropped below 50%, which indicates a contraction in economic activities.

The politburo of the Communist Party of China’s (CPC) Central Committee held a meeting on April 29 and called for stabilizing external trade and foreign investments and promoting healthy growth of the platform economy, which has recently been targeted by regulators.

Yet experts and analysts predict foreign investor confidence could take another hit when the National Bureau of Statistics announces China’s latest economic figures on May 16.

Last Friday, the Shanghai Composite index rebounded by 2.5% to 3,047, above the psychologically important 3,000 level, due to Beijing’s push to boost the economy, helping Hong Kong-listed Chinese technology stocks to rebound significantly.

However, Alibaba’s shares dropped on Tuesday (May 3) morning after mainland authorities said it had recently arrested a man surnamed Ma in Hangzhou for allegedly colluding with foreign powers. To dismiss rumors that Alibaba’s founder Jack Ma was in trouble, Beijing clarified that the arrested person had a three-word name, not two words like “Ma Yun.”

Shanghai has been locked down since March 28 and about 8.2 million people in the city of 28 million are still unable to move freely. Although the number of infections in China’s largest commercial city has been declining, the government has not yet been able to achieve its target of Covid-19 clearance at the community level.

A Covid-19 testing tent at Haidian Hospital in Beijing. Photo: WikiCommons 

Anti-Covid battle critical

On Monday, 274 symptomatic and 5,395 asymptomatic cases were reported, 73 of them identified in the community.

Health officials said Shanghai’s epidemic situation had improved while the anti-Covid battle had entered a critical period. They said a citywide sterilization scheme should be launched in the city, particularly at places where infected people had been found.

Beijing said a total of 53 cases were identified in the capital city in the 24 hours as of 3:15 pm on Tuesday (May 3). A new round of Covid tests was launched on Tuesday, while people were asked to stay home during the Labor Day holidays this week.

Newly-announced economic indicators showed China’s manufacturing sector was hit by virus outbreaks and lockdown measures.

Apart from the manufacturing PMI, China’s new orders index, which tracks the number of new export orders, dropped to 41.6% last month from 47.2% in March. Non-manufacturing PMI, an indicator of activities in the service and utility sectors, declined from 48.4% in March to 41.9% in April, the lowest since February 2020 when China was hit by the first epidemic wave.

Last week, the State Council announced a series of new measures to create jobs and stimulate the economy. Last Friday, the politburo meeting also called for promoting the platform economy and stabilizing external trade and foreign investments.

A group of mainland experts told the Economic Information Daily, a unit of the state-owned Xinhua News Agency, that China should encourage the development of innovative technology, although strong regulations were needed.

“The platform economy has achieved remarkable results in enabling the transformation of the real economy and driving economic growth in recent years, but some chaos such as unfair competition has also been seen,” said Liu Jinrui, a researcher at the Institute for the Rule of Law, China Law Society.

China’s stock markets have been on a roller-coaster ride. Photo: AFP / Getty

‘Strengthen the rules’

Liu said a supervision system should be established as soon as possible to ensure the healthy and sustainable development of the platform economy. He said with the continuous introduction of regulatory measures, the platform economy would see new development opportunities.

“To promote the healthy development of the platform economy, the government should promote innovative development and strengthen the rules at the same time,” said Wu Qi, executive director of the Wuxi Institute of Digital Economy.

Gao Lingyun, a researcher at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, said the mission for China to stabilize its external trade and foreign investments would become even more important when economic figures for April were announced in mid-May.

Gao predicted the central government’s previously-announced supportive measures would show effects in the later period of the second quarter.

Shares of Tencent Holdings recorded a high of HK$757 (US$115) on February 8 last year, but were then under pressure due to Beijing’s curbs on the internet sector. As of last week, it had lost more than half its value to about HK$335.

Shares of Alibaba Group also dropped from their peak of HK$298 on October 23, 2020, to last week’s HK$85 level.

With the new positive signals from Beijing, Tencent’s shares rose 11.3% to HK$377.4, while Alibaba’s shares jumped 16% to HK$102.4 last Friday. Meituan increased 15% to HK$173, while JD.com surged 16.3% to HK$266.

The South China Morning Post reported on the same day that Beijing could end its regulatory campaign against internet giants as officials would soon have a symposium with key technology firms.

Alibaba’s Jack Ma has good reason to smile – it wasn’t he who was arrested. Photo: AFP/Ludovic Marin

No, it’s not Jack Ma

However, shares of Alibaba dropped 9.4% to HK$92.4 on Tuesday morning as investors were worried that Jack Ma could have been arrested.

China Central Television (CCTV) reported on Tuesday that the national security bureau in Hangzhou had arrested a man surnamed Ma on April 25 for allegedly colluding with foreign powers.

The Global Times reported that the arrested person was a hardware research and development director at an IT firm. It said this person, brainwashed by anti-China external powers, set up an anonymous online group in March to spread rumors and fake news to promote the so-called declaration of independence.

CCTV later clarified that the arrested man had a three-word name, meaning he was not Jack Ma. Alibaba’s shares rebounded, but still closed 1.76% down on Tuesday.

The man’s online posts went viral as many people in prolonged lockdowns had lost their patience. Last week, a video was widely circulated on the internet in China as frustrated Shanghai residents banged pots and pans at their homes to protest against living under a strict lockdown for more than a month.

They complained they did not receive enough food from authorities.

Netizens were also shocked to know that an elderly person who was still alive was put into a body bag and sent to a funeral parlor from an elderly care home in Putuo district in Shanghai.

State media said five local officials were under investigation due to the incident. Two funeral staff members were given 5,000 yuan each for saving the old man.

Read: China has a youth unemployment problem

Follow Jeff Pao on Twitter at @jeffpao3