China's Economy Slips Below a Key Threshold

The omicron variant of COVID-19 is hitting the world's second-largest economy hard. Amid efforts at containment, China's official Purchasing Managers' Index for the manufacturing sector dropped below 50 on the 100-point scale in March, the National Bureau of Statistics said Thursday, meaning activity contracted after four straight months of expansion. The FMI for non-manufacturing sectors, including services and construction, also fell from 51.6 in February to 48.4 in March, reports the Wall Street Journal. According to CNN, this marks the first time that activity in Chinese manufacturing and services has "simultaneously contracted" since the height of China's COVID-19 outbreak in February 2020.

This coincides with lockdowns in industrial hubs including Changchun in the northeast, Shanghai in the east, and Shenzhen in the south. "Recently, clusters of epidemic outbreaks have occurred in many places in China, and coupled with a significant increase in global geopolitical instability, production and operation of Chinese enterprises have been affected," says senior NBS statistician Zhao Qinghe, per CNN. Zhiwei Zhang, chief economist at Pinpoint Asset Management, says economic activity "will likely slow further in April" as extensive lockdowns in Shanghai, China's financial capital, began only Monday. The AP describes the two-part citywide lockdown as "China's most extensive" since Wuhan's 11 million residents were forced to stay home for 76 days in early 2020.

Half of the city is locked down through Friday, when the other half will begin its own five-day lockdown, requiring residents to stay home and non-essential businesses to close. Volkswagen and Tesla are among companies suspending or scaling back production at their factories, per the BBC and CNN. Though Premier Li Keqiang reiterated the government's 2022 growth target of 5.5% on Wednesday, many economists say that goal "increasingly appears to be out of reach," per the Journal. Mainland China reported its first deaths from COVID-19 in a year on March 20. The country has reported more than 56,000 symptomatic cases this month, most out of northeastern Jilin. (More China stories.)