China's Economy Plummets in January-February... Double-Digit Decline in Industrial Production and Retail Sales (Update)

[Asia Economy Beijing=Special Correspondent Sunmi Park] China’s economic indicators for January-February plunged to a 'shock' level, reflecting the impact of the COVID-19 outbreak.

On the 16th, the National Bureau of Statistics of China announced that retail sales in China for January-February reached 5.213 trillion yuan, a sharp decline of 20.5% compared to the same period last year. In December last year, the retail sales growth rate was 8%, but due to the impact of the COVID-19 outbreak, consumer sentiment was severely dampened, resulting in a negative retail sales growth rate.

Industrial production for January-February also decreased by 13.5% year-on-year. This contrasts with the 6.9% growth rate recorded in December last year. By category, the light industry sector decreased by 6.5%, and manufacturing fell by 15.7%. Private enterprises were hit hard. While industrial production in state-owned enterprises decreased by 7.9%, the decline in private enterprises reached 20.2%. Regionally, the eastern region saw the largest decrease in industrial production at 16.9%, followed by central (-16.7%), northeast (-11.5%), and western (-7.6%) regions.

This is interpreted as the aftermath of the Chinese government’s bold regional lockdowns and suspension of economic activities to prevent the spread of COVID-19, which prevented factories from operating normally.

Fixed asset investment nationwide for January-February recorded 3.3323 trillion yuan, a decrease of 24.5% compared to the same period last year. The cumulative fixed asset investment growth rate for January-December last year was 5.4%, but investment declined due to the impact of the COVID-19 outbreak, pushing this into negative territory as well.

Earlier, China announced that exports for January-February plunged 17% year-on-year due to the impact of COVID-19, resulting in a trade deficit of 7.09 billion USD. Also, the consumer price index (CPI) for January-February showed an unusual increase of over 5% due to supply disruptions and rising logistics costs caused by the COVID-19 outbreak, and the manufacturing and non-manufacturing (service) business indicators released by both the Chinese government and private sectors for February all collapsed to 'bottom' levels.

The Chinese government, considering the Spring Festival (Chinese New Year) holiday in January-February every year, releases some January-February economic indicators all at once in March to prevent distortion of economic statistics.

The economic indicators falling to historically lowest levels are expected to stimulate additional economic stimulus measures by the Chinese government.

The People’s Bank of China will supply liquidity worth 550 billion yuan (approximately 95.6 trillion won) to the market starting today by lowering the reserve requirement ratio of some banks by 0.5 to 1 percentage point. This measure aims to support the real economy struggling due to production stoppages caused by the COVID-19 outbreak and to reduce financial costs to facilitate lending.

Sun Guofeng, Director of the Monetary Policy Department of the People’s Bank of China, expressed at a press conference yesterday the intention to use various measures to ease the loan interest burden on companies. He said, “We will comprehensively use various measures to ensure that loan interest rates are definitely lowered,” and “We will maintain ample liquidity through various monetary policy tools.” Accordingly, the one-year loan prime rate (LPR), which is the de facto 'loan benchmark interest rate' to be announced on the 20th, may also be lowered from the current 4.05%.

The Chinese Ministry of Finance also allocated a total of 117 billion yuan to local governments for COVID-19 control.

This content was produced with the assistance of AI translation services.