Daily Management Review

Chinese Growth Shrinks For The First Time Since Late 1970s


Chinese Growth Shrinks For The First Time Since Late 1970s
The coronavirus pandemic that hit China at the beginning of the current year has caused a contraction of its economy for the first time in more than 40 years. The Chinese economy had been enjoying an uninterrupted growth since the late 1970s.
According to data from the National Bureau of Statistics of China, the country’s gross domestic product in the first quarter dropped 6.8 per cent year on year.
While the Chinese government started to issue quarterly economic growth estimates in 2992, the last time the country reported a year on year drop in its economic output was in 1976.
A glaring example of the degree of economic impact of the novel coronavirus pandemic that started in Wuhan in late December last year and has since wreaked havoc around the world, is the latest Chinese economic data despite the Chinese economy being the driver of global growth for the last two decades.
The dismal economic performance of China comes in a week in which the International Monetary Fund (IMF) issued a warning of a global economic recession for the current year that will is expected to be the worst since the Great Depression of the 1930s and the loss of the global Gross Domestic Product (GDP) is expected to be much more than what was witnessed during the 2008 global financial crisis.
Within the Chinese economy in the first quarter, there was a drop of 16 per cent year on year in the fixed asset investment while there was a fall of 16 per cent in total retail sales of consumer goods in March.
While pointing to “short-term economic costs” because of the coronavirus pandemic, Mao Shengyong, spokesperson at the statistics bureau, attempted to downplay the long-term impact of coronavirus on the country’s economy.
“We cannot say that the fundamentals of China’s long-term economic progress have changed because of a short-term shock,” he said. The Chinese government expects the average annual growth over the next two years to be about 5 per cent, he added.
Despite the dismal economic data from China, stock markets across the Asia-Pacific region were up as investors were hopeful about the near future as more countries indicated signs of their economies opening up amid the coronavirus pandemic.

There was 1.2 per cent rise in China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks while a 2.3 per cent hike was reported in morning trade at Hong Kong’s Hang Seng index.
Even before the coronavirus pandemic hit the country, the Chinese economy, the second largest in eth world, was already under pressure. The growth in the economy last year was 6.1 per cent which was the lowest for the economy in almost three decades.
Analysts now expect that the full year economic growth results for China will come at a much lower level than last year, based on the first quarter results, which will put into jeopardy the pledge of the Chinese government made in 2010 of doubling the size of the economy by the end of the current year.