Industrial activity in Shanghai - QuantCube’s alternative data suggest it is struggling to rebound
The city of Shanghai lifted Covid restrictions on June 1st after a two-month lockdown. As China’s economic centre and global trade hub, will Shanghai’s emergence from strict lockdown help China’s economic rebound? To examine levels of industrial activity in real-time, QuantCube examined NO2 concentration levels above the Shanghai area.
Shanghai’s state media and inhabitants celebrated the end of lockdown as a return to normal life, work, and production. However, QuantCube’s analysis based on alternative data suggests that industrial activity in Shanghai is struggling to restart.
According to Exhibit 1, NO2 concentration on the first day of lockdown (April 1) was extremely elevated as the red colour represents pollution concentration levels. Fifteen days later, on April 16, NO2 levels indicated a sharp drop (-48% reduction compared to the level on April 1). When we observe the NO2 levels for the period after the city reopened on June 1, the NO2 levels remain low, and between June 1 and June 16, NO2 concentration levels registered only a slight increase (+17%).
Exhibit 2 shows the QuantCube NO2 indicator for the last six months, available on the QuantCube Macroeconomic Intelligence Platform (MIP). Historically, the NO2 concentration indicator rises and decreases very quickly, and reacts immediately as soon as industrial activity slows down or restarts. For example, the NO2 indicator rose sharply after the end of the Chinese New Year in mid-February and reached a peak a few days before the lockdown announcement. Interestingly, after reaching a low in April, the NO2 concentration hasn’t recovered despite the end of strict restrictions.
Even though Shanghai’s 26 million citizens are now allowed to move around the city and some activities are resuming, several factories and businesses are still closed or operate below full capacity, mainly because of labour shortages and supply chain related issues.
How long will it take for the economy of Shanghai to rebound and get back to pre-lockdown levels?
