China's economy suffers historic decline

It is the first negative growth reported by the world's second-largest economy

China's economy showed a historic decline of 6.8% in the first quarter of the year amid widespread factory and business closures caused by the coronavirus outbreak, according to figures released by the National Bureau of Statistics (NBS). So far the COVID-19 pandemic has killed more than 4,600 people and infected more than 82,600 across the country.

And even though it is slightly better than the 8.2% contraction forecast by economist, the numbers mark the country's first economic contraction since it began publishing quarterly data, in 1992. The last time China recorded a full year of economic decline was in 1976, at the end of the Cultural Revolution, according to the World Bank.

Industrial output, which includes manufacturing, mining and utilities activity, fell 8.4% between January and March this year, the National Bureau of Statistics said Friday.  Meanwhile, retail sales plunged 19% in the same period and fixed-asset investment, which measures expenditures on infrastructure and property, was down 16.1%.

The government took the first measures to shut down transportation links in late January, as the virus, which originated in the central city of Wuhan, was spreading across the country and abroad.  Authorities later put entire cities under quarantine in Hubei province, home to Wuhan, and elsewhere in the country.

In recent weeks, China has all but claimed victory over the virus. Authorities reported no new locally transmitted infections for several days starting in late March, as the focus shifted to preventing new infections coming from abroad. The government now says most factories have resumed operations, while schools are gradually reopening in several provinces. Mao Shengyong, a spokesman for the statistics bureau, said the main economic indicators showed a "rebound" in March, and that he expected the momentum to continue in the coming months. 

"China’s priorities going forward will be to continue to control the epidemic, boost domestic demand and bolster its supply chains, said Huang Weiping", a professor of economics at Renmin University of China.

"The true negative impact of the virus on the international market will appear in the second quarter, and that’s when the impact on our country will begin to show," he said.

A recovery in domestic demand may help boost China’s economic growth in the second quarter of the year and help offset the impact of shrinking demand in consumer markets such as Europe and the United States.

China’s exports dropped 6.6% in March compared with the same period last year, according to data released Tuesday, while imports fell 0.9%. However, the data improved over the combined first two months of the year, when exports had fallen 17.2% and imports had plunged 4%. 

"I believe the world economy will experience negative growth this year, but it depends on whether we will cooperate," Huang said. "For example, if China and the US join forces, the economy will be in recession. If China and the US have a confrontation, it will lead to an economic depression."

Beijing on Friday announced it would hold an abbreviated version of its annual parliamentary session, the National People’s Congress, from 26 April to 29 April. The meeting, for which thousands of delegates usually convene to Beijing, was initially supposed to be held starting 5 March but was postponed due to the coronavirus outbreak.

The State Council usually announces an economic growth target at the meeting and lays out the country’s economic objectives. Observers question whether China will set a target number for its economy this year or adopt a more vaguely defined "target mission," considering the uncertainties facing the global economy.

Previously, China has set an ambitious target of eradicating extreme poverty and building a "moderately prosperous society" by the end of 2020, but this is increasingly under threat from the pandemic fallout.

More on this subject: Coronavirus

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