China's economic recovery is still 'stuck in first gear' as pollution readings show air quality is cleaner than pre-pandemic
- China's economic recovery is still "stuck in first gear" based on air quality readings, according to DataTrek Research.
- The investment research firm said air quality in major Chinese cities is still cleaner than pre-pandemic levels.
- DataTrek said that air quality readings are one of the only ways to track economic activity in China.
China's economy is in recovery mode as it emerges from its strict COVID-19 lockdown measures, but it still has a long way to go based on recent air quality data.
That's according to DataTrek Research, which tracks pollution levels in major Chinese cities to gauge the economic rebound of the country.
Air quality is a proxy for a country's economic growth because "pollution is an inevitably byproduct of incremental economic activity," DataTrek co-founder Nicholas Colas said. "Air quality readings are the only real-time measure we know of to track this important market narrative."
Colas analyzed that air quality readings of five major Chinese cities, including Shanghai, Beijing, Shenzen, Guangzhou, and Chongqing.
Across most of the cities, Colas observed that air quality improved on weekends relative to weekdays, something that rarely happened prior to the pandemic in 2019. The cleaner air on weekends suggests to Colas that consumer discretionary spending has not yet fully recovered.
In Shenzen, China's tech manufacturing hub, June 2023 air quality readings are better than readings from 2019, suggesting that manufacturing activity has not yet returned to pre-pandemic levels of output.
"Weekends this month [in Shenzen] have been especially clear, unlike in Beijing, which tells us consumer spending is not consistently improving across China," Colas said.
All of the data suggests to Colas that China's economic recovery is "still stuck in first gear" in terms of both consumer spending and industrial activity. And while some cities are doing better than others from an economic standpoint, there's still a long way to go for the country to recover to pre-pandemic levels.
China is trying to boost its economy via stimulus measures, as it recently cut interest rates, but so far those measures might not be enough.
"While the government has started to provide economic stimulus, we do not yet see any concrete proof it is having the desired effect," Colas concluded.