Those who are bullish on China's prospects are having a great week: its all-important manufacturing sector has returned to expansion. Enjoy it, because this momentary high is already ceding ground to global realities.
The jump in the Purchasing Managers' Index, which reflects confidence in market conditions, to 52 from the record low of 35.7 in February is as good as news gets these days. Readings above 50 signal expansion. But a temporary rebound from a low base is not proof of a sharp V-shaped recovery from the coronavirus shock to Asia's biggest economy.
There are some obvious reasons not to trust China's PMI snapback. Not the least is the consensus among economists that it takes at least three monthly readings to give a clear trend. An even better one rests in the answer to this question: if China really is back, who is buying?
It is not domestic consumers in a nation effectively locked down for three months. Aside from lost income and restrictions on travel, China's 1.4 billion people have every reason to fear a second wave of COVID-19 cases. It is hardly an environment conducive to travel, dining out and buying handbags, smartphones or apartments.
The buyers that really matter, though, are the other major economies, markets which are slowing even faster than China in many cases. The trajectory of U.S. growth is worsening quicker than economists can track. Goldman Sachs, for example, expects a record 34% drop in second-quarter U.S. gross domestic product and a jump to a 15% jobless rate later in the year.
Japan is sustaining serious blows. GDP in Asia's second biggest economy fell an annualized 7.1% in the fourth quarter. Now Tokyo is grappling with the longest downward trend in the Bank of Japan's survey of large manufacturers since the 2008-09 Lehman Brothers crisis, and its PMI is at 44.8.
Data show the decline elsewhere in Asia is already quite precipitous. Around the region, just about all PMI readings are below the 50-mark that separates expansion from contraction. That includes South Korea at 44.2, Vietnam at 41.9 and the Philippines at 39.7.
In fact, the world as a whole is producing dire economic data. S&P Global Ratings thinks global growth will slow to around 0.4%. That would be the weakest showing since 1982. S&P economist Paul Gruenwald's warning that "the decline in activity will be very steep" seems a study in understatement.
It is hard, then, to see who China is going to be exporting to.
China has, of course, picked itself, and the world, up out of crises before by reigniting growth. It did just that during the 1997 Asian financial crisis. It repeated the feat after the 2003-04 SARS epidemic. Yet its post-Lehman resurgence was one for the record books. Tens of trillions of dollars worth of infrastructure projects, credit creation and local government borrowing have kept growth at or above 6% for the past decade.
All that aggressive stimulus left China's financial system more fragile, and more reliant on ever bigger doses of stimulus. On March 30, the People's Bank of China reduced the interest rate it charges on loans to banks by the most in nearly five years. The 20 basis-point cut to 2.20% suggested fresh alarm about China's growth prospects.
Views on those prospects differ but are hardly encouraging. A recent Nikkei survey pointed to a 3.7% GDP contraction in the January-March quarter and 3.3% growth for the year. Fitch Ratings is eyeing a 4% first-quarter drop, noting that President Xi Jinping is overseeing the sharpest slowdown since Mao Zedong's day.
The World Bank is even less optimistic about Chinese growth this year, predicting a 2.3% expansion compared with 6.1% in 2019. Two months ago, the lending institution penciled China in for a 5.9% contribution to global demand.
For an unbalanced, highly-indebted economy at China's level of development, anything between those 2.3% and 3.3% figures is essentially recession. The compact Xi's Chinese Communist Party made with the masses after Mao was this: we will raise living standards year after year in return for limits on free speech and personal freedoms.
Keeping Xi's part of the bargain means Beijing will continue to ramp up stimulus efforts, but in a world without economic engines, success is becoming harder than ever. China will boost fiscal spending, making bigger injections of credit and tweaking tax policies to reassure traumatized businesses and consumers.
Yet externally, China is in a vulnerable state. Few governments are buying Xi's claims that China has really beaten a pandemic that began in Wuhan. There is ample reason, too, to doubt Xi's back-in-business spin. China is highly reliant on a world economy tipping into the worst downturn in decades.
As headwinds intensify, Xi may look back nostalgically to 2018 and 2019 when his biggest worry was Washington's tariffs. Today's coronavirus fallout is an even bigger tax on global commerce. Amid the chaos, China will be lucky to pull off a slow "U-shaped" recovery, let alone a snappy V. Even that might be a tough sell in pandemic-racked world.
William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."