China's Worst Ever Economic Indicators Caused by COVID-19... "Dramatic Collapse" (Comprehensive)

Monthly Retail Sales Growth Rate (Graph: National Bureau of Statistics of China)

[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. The major economic indicators of China have been described as showing a "dramatic collapse."

◆Economic paralysis due to COVID-19...Worst-ever economic indicators= On the 16th, China's National Bureau of Statistics announced that retail sales in China for January-February recorded 5.213 trillion yuan, a sharp decline of 20.5% compared to the same period last year. This is the lowest ever. Retail sales growth was 8% in December last year, but consumer sentiment was severely dampened due to the spread of COVID-19, resulting in a negative retail sales growth rate.

Industrial production for January-February also decreased by 13.5% year-on-year. This is the first time industrial production growth has recorded a negative figure. This contrasts with the 6.9% growth recorded in December last year. By category, the light industry sector decreased by 6.5%, and manufacturing dropped by 15.7%. Private enterprises were hit hard. While state-owned enterprises' industrial production decreased by 7.9%, the decline in private enterprises reached 20.2%. By region, the eastern region saw the largest decline in industrial production at 16.9%, followed by central (-16.7%), northeast (-11.5%), and western (-7.6%) regions. This is attributed to the Chinese government's bold regional lockdowns and suspension of economic activities to curb the spread of COVID-19, which prevented factories from operating normally.

Fixed asset investment nationwide for January-February recorded 3.3323 trillion yuan, a 24.5% decrease 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 COVID-19, pushing this into negative territory. The urban unemployment rate also rose to a record high of 6.2%.

The Chinese government, considering the Spring Festival (Chinese New Year) holiday in January-February each year, releases some economic indicators for these months together in March to prevent distortion of statistics. This year, January-February coincided with the outbreak and spread of COVID-19 in China, fully reflecting the economic shock caused by the pandemic.

The January-February economic indicators, announced after China declared the peak of the COVID-19 spread had passed, serve as a barometer to estimate how severe the economic shock will be for the global economy, which is just entering the early stages of the outbreak. Iris Pang, an economist at ING Bank Hong Kong, said, "COVID-19 has stopped the Chinese economy from factories to consumption," adding, "The widespread COVID-19 has damaged global demand and supply chains, which will eventually negatively affect China's manufacturing and exports in March-April." Mao Shengyong, spokesperson for China's National Bureau of Statistics, expressed concern that "global economic and trade growth may slow further, affecting China's economic growth."

Some suggest that it may take several more months for the Chinese economy to return to normal, and as a result, the economic growth rate for the first quarter of this year could fall to the 3% range, about half of the 6% recorded in the fourth quarter of last year. The Hong Kong South China Morning Post (SCMP) described the economic indicators released that day as showing a dramatic collapse.

However, there are analyses within China that some optimistic factors remain. Spokesperson Mao of the National Bureau of Statistics said, "Typically, about 40% of the first quarter's GDP comes from March, so March, which is expected to be better than January-February, makes the first quarter's economy more optimistic," adding, "The second quarter economy, where the effects of the Chinese government's economic policies will become visible, could recover more noticeably."

◆China struggles to devise countermeasures...Expectations for additional stimulus= The worst-ever economic indicators are expected to prompt the Chinese government to introduce additional stimulus measures. At the briefing on the economic indicators, China's National Bureau of Statistics stated, "The economy in January-February was impacted by COVID-19," but also said, "We will increase the intensity of policy responses to mitigate the shock and restore economic and social order."

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

Sun Guofeng, director of the Monetary Policy Department at the People's Bank of China, expressed at a press conference the day before that various measures will be used 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), the de facto 'loan benchmark rate' to be announced on the 20th, may also be lowered from the current 4.05%. The Ministry of Finance of China has also allocated 117 billion yuan in funds to local governments for COVID-19 control.

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