An obvious brake on Chinese growth: GDP collapsed by 6.8% in the 1st quarter, its worst result since the end of the Maoste era, when the Covid-19 epidemic paralyzed the country. Although subject to caution, the GDP figure of China is still scrutinized, given the country’s weight in the world economy.
The real contraction in the 1st quarter is undoubtedly much stronger than what the (official) figures suggest, estimates the economist Ting Lu, of the investment bank Nomura. This drop is less pronounced than the forecasts of a group of analysts polled by AFP (-8.2%). However, this was the worst performance since the start of quarterly GDP publications in the early 1990s. In the last quarter of 2019, growth was 6% year-on-year. In annual terms, China has not experienced a contraction in its GDP since 1976.
The first quarter score was particularly expected, with China having been the first country hit by coronavirus at the end of 2019. Anxious to stem the spread of the virus, which officially killed more than 4,600 people in China, Pkin adopted unprecedented containment measures at the end of January that have led to activity. It has since gradually resumed.
But as the virus spreads throughout the world, China must face new difficulties and challenges to restart activity and production, a spokesman for the National Bureau of Statistics, Mao Shengyong, admitted to the press. Despite improved health conditions in recent weeks, hundreds of millions of Chinese continue to limit their movements for fear of catching the virus. This context has penalized consumption.
No deal
Retail sales thus dipped again in March, by 15.8% year-on-year. They had already declined by 20.5% in January-February combined, the only statistic available. But industrial production picked up with a decline of only 1.1% (against -13.5% in January-February), suggesting a restart of the country’s activity.
For their part, fixed capital investments in the second world economy fell by 16.1% over the first three months of the year (compared to -24.5% in the last publication). Between April and June, China should resume growth after having signed in the 1st quarter its most severe slowdown since the Cultural Revolution which ended in 1976, estimates the analyst Julian Evans-Pritchard, of the cabinet Capital Economics.
The Asian glove will not be out of the woods. The difficulties should even intensify, according to Julian Evans-Pritchard: rising unemployment, weak domestic demand and difficult economic conditions abroad, which will weigh on exports. The latter are an essential engine of the Chinese economy.
But with Beijing’s main trading partners paralyzed in turn by the epidemic, China’s overseas sales fell again in March (-6.6%), according to figures released by Customs on Tuesday. . This contraction is however less pronounced than that of January-February cumulative (-17.2%).
A rebound next year?
Figures for March seem to indicate that for the Chinese economy the worst is over but the recovery will be long, warns Julian Evans-Pritchard. Especially since the pandemic has weakened private small and medium-sized enterprises, the most dynamic in terms of employment. No less than 460,000 of them shut down in the first quarter, said Trivium China.
The unemployment rate thus remained at a high level in March (5.9%) after an all-time high in February (6.2%) – an indicator which only takes account of the situation in urban areas. The pressure on employment is increasing, Ting Lu estimates. This criterion is very followed by the communist leaders, anxious to maintain social stability.
As a result, Pkin announced various tax measures for SMEs and made several interest rate cuts to encourage banks to lend more to these businesses. But analysts say these measures are insufficient and only a large stimulus package could sustain the economy. This option seems to be at this point in time by Pkin, at a time when the country is looking to consolidate its finances.
Due to persistent uncertainties linked to the pandemic, China, which draws up its economic roadmap each year in March, has still not set a growth target for 2020. In its latest forecasts, the International Monetary Fund (IMF) said Tuesday expect moderate growth of 1.2% this year, before a 9.2% surge next year thanks to a hoped-for recovery in the global economy.
(nxp / afp)
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