China’s GDP falls by 6.8% in the first quarter, and the outlook for the first negative recovery in growth in decades is uncertain.

On April 17, China’s National Statistical Office announced that its GDP fell 6.8% year-on-year in the first quarter of this year. Negative quarterly growth in the Chinese economy has been extremely rare in the past 40 years.

This is the lowest value since China began publishing quarterly GDP data in 1992, and it was also the first time that the quarterly growth rate was negative.

At the same time, employment data showed that the unemployment rate in the national urban survey in February was 6.2% and fell to 5.9% in March. For comparison, the value held between 5.0% and 5.3% each month last year.

In terms of medium-term impact, economists believe that the rebound in the Chinese economy depends on the extent of the epidemic.

According to external estimates

Under the impact of the epidemic, China’s GDP growth rate was negative for the first time. The decrease is basically consistent with external estimates.

Previously, the average forecast for 57 comprehensive Reuters organizations showed that due to the continuing impact of the epidemic, China’s first quarter gross domestic product (GDP) is expected to decrease by 6.5% year-over-year.

The Chinese media Caixin’s survey of 18 domestic and foreign institutions revealed that economists’ average GDP growth rate for the first quarter was -6.6%, with a median of -7%.

Additionally, economists estimated by Bloomberg News have an average value of -5.4%. Investment bank Goldman Sachs forecast a GDP growth rate of -9% in the first quarter.

The way forward for the Chinese economy is also very difficult. Reuters predicts that after the annual decline in the first quarter, the “second impact” caused by the epidemic abroad will overlap in the second quarter. The originally expected V-shaped bounce is unlikely. However, if the epidemic abroad can be controlled between April and May, and the economy gradually returns to normal in the second half of the year, it is expected to reach 5.9% and 6.3% in the third and fourth quarter, and the annual economic growth rate may be 2.5%.

Not surprising data

Many experts are not surprised that China’s GDP fell by 6.8% in the first quarter.

“In the first quarter of this year, China registered a negative growth rate for the first time, which has only been seen in recent decades.” Hu Rong, an assistant professor of real estate and finance at the Chinese University of Hong Kong, said China has imposed a travel ban, many cities are in a state of blockade, and domestic business activities are basically suspended. . Impressions of the epidemic in Europe, North America, and elsewhere have caused China’s exports to drop significantly. Therefore, GDP is inevitably negatively affected.

“In a rapidly changing environment, the true economic situation may be difficult to assess, and the real economic situation may be worse. The manufacturing industry is clearly affected, but there are no signs of an upturn in the service industry.” (Brock Silvers) said.

Albert Park, the chief professor of economics at the Hong Kong University of Science and Technology, also pointed out some of the data that may be overlooked. He said evidence from other sources regarding employment and specific economic activity suggests that negative impacts may be underestimated, and official data may not track the production status of small businesses and self-employed workers due to their dependence on local consumer demand. Extremely strong, the blockade hit them particularly hard.

Uncertain prospects

In terms of medium-term impact, economists believe that the rebound in the Chinese economy depends on the extent of the epidemic.

Lu Xiuquan believes that the contraction in the first quarter is not a short-term problem, and China’s GDP in 2020 may even be negative. Beijing has increased spending on infrastructure, but it may not have the expected impact.

Hu Rong said that despite initial control of the epidemic in China, most cities are now basically reopening. However, the development of the epidemic is still unclear, and its impact on China’s consumption and exports remains large. We can see that the economy deteriorates further in the second quarter.

“If the epidemic situation does not improve in the next one or two quarters, we can see the Chinese economy enter a new period: the period of recession.”

In the long run, economists are more pessimistic.

Park Shui-shui believes that the Chinese economy will largely recover from this shock, but will not change the long-term trend that has led to a slowdown in the Chinese economy, including the rapid aging of the population, and opportunities to increase productivity through technology transfer in developed countries. Decrease, and more and more barriers to international free trade and investment.

However, Park Shui-shui also mentioned that the bright line behind the dark clouds: A major economic downturn can accelerate transformation and improvement through creative destruction, because weaker companies are eliminated and stronger companies have more advantages. The epidemic also accelerated the use of Internet technology in commerce and communications, which can increase productivity.

“China may not be able to return to the state before the slowdown.” Lu Xiuquan explained that once the epidemic subsides, Sino-US relations can continue to deteriorate. China has only partially fulfilled the first phase of the trade agreement. Second, whether it’s fair or not, the United States blames China for the epidemic. Trump’s reelection may be tougher for China, such as the exclusion of companies listed in the US. USA That they do not meet US audit standards. USA The world has also begun to shift China’s supply chain to other countries, and this process is likely to accelerate.

Park Shui-shui also mentioned that the political factors caused by the epidemic have an impact on the economy. He believes that these political factors, especially the western hope of punishing China for the epidemic and avoiding dependence on China’s supply chain, may lead to further deterioration in China’s international relations, which has always brought more trade barriers. and investment, which may slow down China’s future growth.

However, the weak Chinese economy is not good news for the rest of the world.

Hu Rong said that China’s imports and exports are huge, and China’s role is very important to many countries. Much of the global economic growth comes from China. Due to China’s high economic dependency on many countries and its close trade relationship, the world economy is likely to slow further still before China tries to recover from the impact of the epidemic and resolve trade disputes with the United States.

Therefore, in the post-epidemic era, China is equally important to the recovery of the world economy.

Park Shui-shui said that considering that China’s economy is recovering and that most of the world’s countries are blocked due to the epidemic and demand is weak, right now, China’s economic recovery will spur recovery. economic from other countries in the world. Additionally, China’s concentrated production capacity provides the much-needed respirator and protective clothing to help the world fight the epidemic.

The biggest decrease in February, decreased in March

Judging by the details of the statistics published the same day, the situation of primary production (agriculture) is relatively good at the end of production, and value added in the first quarter decreased by 3.5% year-on-year. The secondary industry (industry) and the tertiary industry (service industry) registered greater decreases, -9.6% and -5.2%, respectively.

Various economic data in February “ended”. From January to February, industry value added decreased by 13.5%, and total retail sales of consumer goods decreased by 20.5%.

The decrease in data in March was reduced. Compared to February, the industrial sector increased significantly, investment in fixed assets recovered slightly, and retail sales remained basically unchanged. All three increased by 32.13%, 6.05% and 0.24% respectively.

Among all types of consumption, the restaurant industry was the most affected, with revenues of 602.6 billion yuan, a decrease of 44.3%.

In comparison, online retail sales of physical goods were 1.853.6 billion yuan, an increase of 5.9%.

The “troika” (consumption, investment, foreign trade) that has fueled the economy has decreased to various degrees in the first quarter:

• Total retail sales of social consumer goods were 785.8 billion yuan, down 19.0% year-on-year;
• National investment in fixed assets was 841.4 billion yuan, 16.1% less year-on-year;
• Imports and exports were slightly better, but also fell 6.4% year-on-year.