China, the world’s second-largest economy appears to be in doldrums after the National Bureau of Statistics said that the country’s economic output shrank 6.8 percent from January through March compared to the same period last year.
The coronavirus pandemic which severely hit the country might have eased down a little but an economy is still hurt.
Once called the world’s growth engine, China is now about witness a 6.8% drop in GDP compared to the first quarter of 2019. Several estimates also suggest that this is China’s first economic shrinkage since it first started publishing quarterly data on GDP in 1992.
A full year of economic depreciation was recorded at the end of the Mao-era in 1976. The pandemic which has put China’s massive export sector on a grinding halt has also left the industrial production disrupted. Almost every economic data in recent months has indicated a fall in the economy.
“Due to the protracted postponement of the reopening of offices and factories in February, China’s real GDP growth rate is estimated to contract sharply in [the first quarter of] 2020,” Rajiv Biswas, Asia Pacific chief economist at IHS Markit told Al Jazeera.
The level of value added to goods and services – a measure of economic productivity – was weaker than the lowest reading during the 2008 financial crisis, he added. Millions of migrants who work in the factories are still stuck in quarantines or in their hometowns fearing their safety.
If people can’t be convinced to start spending money again, “the demand shock may spread to East Asia and then to Europe and the U.S. — and the world may face a disaster,” said Cao Heping, a Peking University economist talking to New York Times.
Julian Evans-Pritchard, a senior Chinese economist at Capital Economics said in a note to clients that sectors that were among the best placed to weather the COVID-19 disruption such as post, telecommunications, and software have seen their sales drop.
Among the worst-hit sectors are the cinema revenue, long-haul travel, subway traffic, and car sales. The economy remained to be disrupted for much of February with factories and shops closed and workers stranded at home.
In these disturbing times, not all experts point towards an economic shrinkage. Iris Pang, Greater China economist at ING, forecast a 3.6 percent growth in China’s GDP in the first quarter.
Pointing out to the fact that tax and fee cuts that have been implemented since the outbreak, she said it could give revenue starved businesses a much-needed lifeline in an email exchange with Al Jazeera.
“March’s activities recover quite well. Electricity consumption in March was higher than that in 2019, signaling that industrial production growth could be a positive year on year growth,” Pang added.
The Chinese government has left no stone unturned to boost the economy for the second quarter. A number of stimulus measures including credit support for firms and infrastructure investments have been announced.