China’s GDP Drop
China Discloses Contraction in GDP
China, whose economy had been growing at the end of 2019, has officially reported a 6.8% contraction in its first quarter GDP this year. This figure marks the first decline in the world’s second-largest economy (after the US) since records began in 1992.
Data points released by the National Bureau of Statistics of China show a stark contrast to this time last year. Industrial production in the first quarter of 2020 dropped 8.4% from that in 2019. Fixed asset investments were 16.1% lower from January to March of 2020 than they were in that same 2019 window. Retail sales this year dropped by 19% in the first quarter, with a 15.8% decline in March alone. Unlike other sectors, online sales grew at a rate of 5.9% from 2019.
The Promise of Increased Transparency
Analysts frequently doubt figures released by the Chinese government. Its death toll from the novel coronavirus has been revised time and again to show higher numbers than were originally disclosed. On Friday alone, 1,290 deaths were added to the previously reported 2,579 in Wuhan, showing a 50% increase in the statistics. The Chinese National Health Commission has provided explanations for the revisions, and insist it’s committed to an “open and transparent disclosure of information and data accuracy.”
The numbers regarding the country’s economic situation seem surprisingly honest, though, suggesting that Beijing may be reevaluating how it approaches economic guidance. With China as an example, other countries hit hard by the pandemic can develop a sense of what to expect—at least in the next few months.
Chinese Example Foreboding for US
The Chinese numbers serve as indicators of what could be expected stateside. Even when major industries resume, economic behavior won’t go back to business as usual. Viral spread still means less demand for Chinese export plus concern about a second wave of infections means continued pressure and uncertainty. The country’s GDP could drop even more if there’s a secondary outbreak.
Chinese economist Bo Zhuang explains “Even after the lockdowns have been lifted, people are cautious to consume. Shopping malls are open but they are not consuming, and that is the key.” Only 25% of Chinese respondents to an online survey by Morgan Stanley indicate plans to leave their homes for non-essential spending. The American economy depends even more on consumer spending than China does, so these patterns provide a dismal picture of what could happen in the US economy in the coming months.
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