SpaceKnow Nowcasting Newsletter (SNN) #12

China’s Lockdowns from Space

Chinese provinces, Shuangdon, Guangdong, Hubei, and Yunnan bounce back strongly once restrictions are lifted.

Summary

SpaceKnow monitors several industries in China from space. For this SNN, we study those industries by province. Our analysis suggests that full lockdowns have an immediate impact on consumer spending. Short lockdown periods cause spending to bounce back soon. Longer lockdown periods have secondary effects with lingering economic weakness. If Chinese authorities soften their stance, most provinces will recover quickly.  Until October - November 2022, most provinces were recovering well. 

In the analysis below, several industries are used to analyze consumer and business behavior during lockdowns. The most important index monitors Logistics/Distribution centers. The index tracks trucks and containers at distribution centers used to deliver goods to retailers and for e-commerce. This index can be used as a proxy for consumer demand. Another index tracks assembled cars at manufacturing facilities. It serves as a proxy for production and lockdown behavior of automobile companies. We have also used Cargo Airports and Coal sectors to supplement information on when lockdowns took place.

Several news outlets have reported protests around zero tolerance Covid-19 policies in China. The protests have been widespread and led to some recent easing of policies. SpaceKnow’s data suggests that prolonged lockdowns have led to consumer spending weakness and that is potentially the cause of protests. However, once lockdowns are eased, in most cases, evidence suggests that the economy will bounce back quickly. 

Shandong: Shandong is the second most populous province in China and ranked third in GDP terms. It is one of the top manufacturing provinces in China. Figure 1 shows that Shandong had three periods of prolonged lockdowns. After the first period ended in 2020, e-commerce spending recovered quickly. After the second lockdown in 2021, consumer spending has remained weak into this year. The blue line, Assembled Cars Index, shows that the business lockdowns were prolonged and deep in 2020/2021. Dips in the line are periods where manufacturing slowed considerably. 

Figure 1: SpaceKnow’s Shandong Logistics Index and Shandong Assembled Car Index

Note: The last available data point is 11/28/2022, the data point reflects the 10 day sum, indexed to June 2019. The Logistic Center Index represents the accumulated level of goods movement at distribution centers for 10 days. The Assembled cars Index represents the accumulated level of assembled cars at manufacturing facilities for 10 days. 

Guangdong: Guangdong is the largest province by GDP in China. In Figure 2, SpaceKnow Guangdong Logistics Index shows that the impact of Covid lockdowns has been more limited than in Shandong. The blue shaded areas are periods when Covid cases rose sharply in China (based on govt data) and news reports of lockdowns in Guangdong emerged. In Guangdong, lockdowns have been less severe with each incident. SpaceKnow Automotive Index and Cargo Airport data (not displayed here) also suggest that the 2022 lockdowns were less severe than the 2020 period. 

Figure 2: Guangdong Logistics Centers Activity, 10 day Index

Note: The last available data point is 11/28/2022, the data point reflects the 10 day sum of area covered by trucks and containers at most distribution/logistics centers in Guangdong. The blue shaded areas are periods when Covid cases rose sharply in China (based on govt data) and news reports of lockdowns in Guangdong emerged. Units are in square meters on Y-axis. 

Hubei: Hubei was the epicentre of the Covid crisis in 2019-2020. It is the 7th largest economy in China. In 2019, Hubei Province, of which Wuhan is the capital, was the fourth-largest car producer in China, with about 10% of the country’s car-making capacity and produced 2.24 million vehicles. In Figure 3, SpaceKnow Hubei Logistics Index shows that the area had largely recovered from the 2020 crisis until about a month ago. The blue shaded areas are periods when Covid cases rose sharply in China (based on govt data) and news reports of lockdowns in Hubei emerged. SpaceKnow Hubei Assembled Cars Index (not displayed here) shows subdued production until mid-2021, and a sharp rise thereafter. 

Figure 3: Hubei Logistics Centers Activity, 10 day Index

Note: The last available data point is 11/28/2022, the data point reflects the 10 day sum of area covered by trucks and containers at most distribution/logistics centers in Hubei. The blue shaded areas are periods when Covid cases rose sharply in China (based on govt data) and news reports of lockdowns in Hubei emerged. Units are in square meters on Y-axis. 

Yunnan: How have the lockdowns impacted the smaller provinces? Yunnan borders Myanmar and its economy is dependent on trade with the ASEAN region. In spite of news reports around lockdowns in tourist areas, Yunnan has continued to show strong growth, driven by rising trade with its neighbors.

Figure 4: Yunnan Logistics Centers Activity, 10 day Index

Note: The last available data point is 11/30/2022, the data point reflects the 10 day sum of area covered by trucks and containers at most distribution/logistics centers in Yunnan. Units are in square meters on Y-axis. 

Bottom Line

SpaceKnow Logistics Indices show that the impact of Covid-related lockdowns are generally short-lived and the provinces bounce back strongly once restrictions are lifted. If recent reports are to be believed, our data suggest that most provinces will see a rise in spending.

SpaceKnow provides satellite activity data. We research and monitor hundreds of thousands of locations, spanning different industries, to create the world's most comprehensive activity datasets. Allowing users to see an unbiased and near-real-time view of current levels of activity, inflection points, and trends for countries, companies, and commodities. Our customers include investors, quants, asset managers, traders, corporate strategists, banks, economists, and governments.

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