V stands for vengeance. Chinese government is going to rely on people’s revenge feeling to recover and enjoy a restart after Coronavirus crisis. Since infection cases keep decreasing, China is going to count upon the so-called “revenge spending”, that is, people’s desire to make up for lost time. In so doing, consumption and shopping will start again; in the meantime, leather tanning takes off. What they hope is that economy indicators, graphically displayed in a diagram, will take the shape of a V: that is, after a swift descent, down to the bottom, there will be a rapid resurgence likewise. It might not be that simple anyway.
China’s expectations
As reported by the Corriere della Sera, China has been going through a terrible month: in February, domestic industrial production dropped by 14% on annual basis, while retail sales decreased by 21%. Consequently, such negative trend affected the gross domestic product (GDP). According to Goldman Sachs, in 2020 first quarter loss is likely to amount to 9%. Following that, there will be a rebound effect progressively: in the second quarter of the year, due to the global economy slowdown, China’s trend will supposedly reach +1.5%. Finally, in the third and fourth quarters China’s economic index is likely to reach +7.5% and +9.8% respectively. Nevertheless, the Financial Times wonders how close such rebound could actually be. In fact, according to their China Economic Activities Index, which is a system for the daily tracking of economic activities, based on six parameters, economic levels have been continuously lower by 60%, for a few weeks, compared to the ones prior to Coronavirus outbreak. It is not going to be easy to recover quickly from such blow.
Leather tanning takes off meanwhile
In the meantime, the leather industry is gradually starting up again likewise. According to ILM, companies working in the industry, from tanning to finished product, are currently running at 70 to 80% of their productive potential. Things are progressively improving compared to the situation monitored around March 10th. Nevertheless, some problems require a solution: demand is still weak, of course. In the region of Wuhan, there are still some restrictions anyway. Besides that, demand for raw hides and skins is stagnant. Full recovery is not feasible yet.
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