Activity across both industry and services is recovering as measures to contain the coronavirus have been eased. But the recovery is likely to run into the constraint of weak demand before long. The labour market is the biggest domestic concern. The official unemployment rate increased from 5.3% in January to 6.2% in February. Weekly surveys conducted by Zhaopin – a major Chinese recruitment website – suggest that close to a quarter of firms had stopped paying wages by last week. A further half of firms had cut or delayed pay. Job losses and declines in household income will prevent output returning fully to potential, without significant policy support.
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