Chinese economy devastated by coronavirus outbreak
Industrial output and urban unemployment worst on record
Retail sales in China have plummeted, with some analysts predicting coronavirus will have a deeper impact on the Chinese economy than the global financial crisis
China’s industrial output fell to its lowest level on record in the first two months of this year and urban unemployment hit its highest rate ever in February, as the coronavirus brought the world’s second-largest economy to a standstill. The official data — some of the worst official figures ever reported by China — suggest President Xi Jinping’s attempts to expedite an economic recovery in late February have not yet had the desired effect. Industrial output tumbled by 13.5 per cent in the first two months of this year and the urban unemployment rate surged to 6.2 per cent in February, the bureau said on Monday.
The latest economic data also showed that China retail sales plummeted by 20.5 per cent year on year in January and February and fixed asset investment fell by 24.5 per cent, down from 5.4 per cent growth when the data were last reported. The numbers were far below analysts’ expectations with many China experts expressing surprise that government officials were willing to report such devastating figures. “The latest activity and spending data were much weaker than expected and point to a far deeper downturn than during the Global Financial Crisis,” Capital Economics said in a note on Monday. Growth in services production fell 13 per cent in the first two months, according to official data.
Coupled with the industrial production figure, the data suggests that China’s gross domestic product growth was -13 per cent during the first two months of the year, according to Capital Economics. “The actual shock could be much bigger than those deeply negative January-February numbers suggest, because the lockdowns started only from 23 January,” said Nomura’s chief China economist Ting Lu.
Officials in Beijing attempted to put a positive spin on the numbers, saying the impact was temporary. [HAHAHA!]“The economic development in the first two months was affected by the outbreak of Covid-19,” said Mao Shengyong at the National Bureau of Statistics. “However, from a comprehensive perspective, the impact of the viral disease is short term, external and manageable.”
But the data bode poorly for the country’s economic outlook in 2020. The coronavirus outbreak that started in the central Chinese city of Wuhan in December has led to a widespread lockdown of cities across the country. The movement of migrant workers looking to return to factories across the country has been hindered, resulting in a serious hit to urban unemployment. The poor economic data comes as new cases of coronavirus in China have plummeted while the number of infections has soared across the rest of the world. China’s risky plan to revive the economy China initially suffered a supply shock, with its factories unable to operate.
But many economists are now concerned the country could now face a plunge in demand as the rest of the world cuts imports. “A V-shaped recovery seems unlikely as the virus is spreading everywhere, which will pose a downside bias for external demand for China,” said Zhou Hao, senior emerging markets economist at Commerzbank. China’s central bank has taken some monetary policy measures to help stimulate the economy but analysts said policymakers would need to do more to stimulate the economy. Other central banks, including the US Federal Reserve, have unleashed huge stimulus packages to cushion growth as the outbreak sweeps across the US and Europe.