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China Suffers Historic Economic Slump With Hard Recovery Ahead

The coronavirus pushed China’s economy into its first contraction in decades in the first quarter, with the spread of the disease around the world now leaving the nation reliant on fragile local demand to spur a recovery.To get more China economy news, you can visit shine news official website.

Gross domestic product shrank 6.8% from a year ago, the worst performance since at least 1992 when official releases of quarterly GDP started and missing the median forecast of a 6% drop. The economy hasn’t contracted on a full-year basis since the end of the Mao era in the 1970s.

Hours after the report, the country’s leaders pledged to deliver more stimulus including interest rate cuts to boost domestic demand, China Central Television reported Friday evening after a meeting chaired by President Xi Jinping. Authorities will keep liquidity “reasonably ample” by cutting the amount of reserves banks need to hold, the report said, without providing details.

“The first quarter of this year was very unusual,” CCTV reported, citing remarks made during the Politburo meeting. “The sudden Covid-19 outbreak had an unprecedented impact on China’s economic and social development.”Both retailing and factory output showed improvement from the nadir in the first two months, suggesting a stabilization in economic activity. But the data overall indicated an uphill struggle awaits the world’s second largest economy and its experience will be monitored elsewhere for clues as to how fast other economies will emerge from lockdowns.

We expect this recovery to continue,” said Louis Kuijs, head of Asia economics at Oxford Economics Hong Kong Ltd. “However, the upturn will be slowed down by lingering consumption weakness and sliding foreign demand.”

Other indicators showed retail sales sliding 15.8% in March as consumers remained wary, while investment decreased 16.1% in the first three months of the year. A brighter sign was the smaller-than-expected contraction in March industrial production of 1.1% as factories returned to work amid easing lockdowns.

China’s markets held on to gains and ended slightly higher as investors had already anticipated the weak data. The Shanghai Composite Index added 0.7%, while the Hang Seng Index climbed 1.6% in Hong Kong.

The economy was forced into a paralysis in late January as the epidemic that first started in Wuhan spread across the country. The economy remained shuttered for much of February with factories and shops closed and workers stranded at home. The process of resuming business has been slow and the return rate only inched up to around 90% at the end of March, Bloomberg Economics estimates.While exports fell less than expected in March as production capacity was gradually restored, economists warn headwinds lie ahead as the rest of the world shuts down and external demand diminishes.

“Most major economies are still in the lockdown stage,” Robin Xing chief China economist at Morgan Stanley Asia, said on Bloomberg TV. “As a result, growth in the second quarter will be shallow, just marginally above zero.”

On the positive side, the surveyed jobless rate actually declined in March, to 5.9% from February’s record 6.2%. That suggests China is so far avoiding the kind of job destruction seen in the U.S., where more than 5 million Americans filed for unemployment benefits last week.