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China’s GDP is falling, but recovery is in the near future

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China’s GDP is falling, but recovery is in the near future
April 17
09:00 2020

The State Statistical Office of China has recorded the first decline in GDP in the entire history. The first quarterly GDP report was published in 1992. The decrease in the indicator for the first quarter has amounted to 6.8% in annual terms.

This sharp decline objectively reflects the damage caused to the economy of the Celestial Empire by the coronavirus pandemic and the associated restrictions. Official Beijing will have to do their best to support the economy. Their task is not to forget about the unemployment growth, the debt burden and the market risk.

In the fourth quarter of last year, the PRC economy grew by 6% in annual terms. Despite the fact that the GDP fall is substantial, it doesn’t differ from forecasts. Analysts believed that compared with the previous quarter, the decline would be equal to 9.9%, but it turned out to be 9.8%.

In principle, using the example of China, it is possible to predict the situation developing around other countries after the end of quarantine.

Not only quarterly, but also monthly statistics has been released. It became known that the unemployment rate in March was 5.9%. This is better than the 6.2% recorded in February, but worse than the usual level in China over the past few years, the figure has been equal to 5%.

But China’s industrial production almost recovered in March; the decline in annual terms has totaled 1.1%, although analysts believed that the decline would be at least 7.3%.

In the processing industry, the decrease in March was 1.8% (in January-February the indicator fell by 15.7%). The mining and public sectors showed an increase of 4.2% and 8.9%, respectively. Food production has increased by 5.7%.

The automotive industry (-22.4% in March) and retail sales (-15.8%) have suffered more than other sectors.

Retail sector problems are caused by the fact that people continue to avoid shopping centers and other public places. However, analysts are confident that the restoration of normal retail performance will happen in the near future.

 

The material was prepared with the participation of Katya Wilson,
a leading analyst of the brokerage company UFT Group

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