China Likely to Record Negative Growth in Q1... First Time Since Cultural Revolution

Q1 Economic Growth Rate Announcement on the 17th... First Indicator Reflecting the Impact of COVID-19
Most Forecasts Negative

[Image source=Yonhap News]

[Asia Economy Beijing=Special Correspondent Park Sun-mi] China is expected to show the economic impact of the novel coronavirus infection (COVID-19) on the 17th with its first negative quarterly growth rate since the Cultural Revolution.

China's National Bureau of Statistics will announce the March economic indicators including industrial production, retail sales, and fixed asset investment, along with the first quarter economic growth rate at 10 a.m. local time on the 17th. The first quarter growth rate, which will fully reflect the economic shock caused by the COVID-19 outbreak, is widely expected to be negative.

Bloomberg, based on its own survey of economic and financial institutions, projected China's first quarter economic growth rate at -5.3%. This would be the first time China has recorded a negative quarterly economic growth rate since the end of the Cultural Revolution in 1976.

Specifically, Moody's projected -4.6%, UBS -5%, HSBC -5.5%, Standard Chartered -6%, and Oxford Economics -8.5%, all forecasting negative growth rates ranging from 4% to 8%. China's state-run media Global Times reported that in a survey of 20 economists, 18 predicted an economic contraction in the first quarter, with most expecting negative growth between 3% and 8%.

Due to the special circumstances of the COVID-19 outbreak and the sudden change in economic activity flow, the forecasted first quarter growth rates by experts vary widely. While some Chinese government-affiliated economists still expect positive growth, others such as Goldman Sachs (-9%) and Barclays (-15%) anticipate a sharp economic downturn. A Western news agency reported that a survey of 57 major analysts showed a wide range of forecasts for China's first quarter economic growth rate, from a 28.9% contraction to a 4% increase.

The main cause of the first quarter economic contraction is the government's restrictions on population movement and requests for business shutdowns due to the COVID-19 outbreak, which slowed overall economic activity. Previously released economic indicators for January and February, including industrial production, retail sales, and fixed asset investment, were all described as "the worst ever." Additionally, the urban unemployment rate for January and February surged to a record high of 6.2%.

Professor Chao Heping of the Economics Department at Peking University estimated that "economic costs of about 5 trillion yuan were incurred due to factory closures caused by COVID-19," and forecasted that "the first quarter growth rate will be around -3%."

However, with China's effective COVID-19 control measures, economic normalization has started in various places since March, raising expectations that a rebound phase offsetting the economic shock will unfold after the first quarter. The key lies in how actively and strongly China pursues economic revitalization through fiscal and monetary policies.

China is currently implementing fiscal policies such as raising the fiscal deficit ratio, expanding the issuance scale of local government special bonds, and issuing special national bonds, alongside liquidity easing policies like lowering bank reserve requirements, inducing reductions in market interest rates, and providing financial support to small and medium-sized enterprises to minimize the COVID-19 impact. It is highly likely that China’s full-scale economic stimulus measures will be unveiled after the National People's Congress (NPC) and Chinese People's Political Consultative Conference (CPPCC), where specific growth targets, budgets, and economic policy blueprints for this year will be announced.

There are also predictions that China's contribution to the global economy will increase further once it enters the full-scale phase of offsetting the COVID-19 shock.

Although China’s economy is already normalizing due to the subsiding COVID-19 situation, the global spread of COVID-19 continues, making economic normalization difficult worldwide for the time being. The Global Times explained, "Among 20 economic experts, 5 expect China’s contribution to global economic growth this year to exceed 50%, and 6 expect a contribution of 30-40%." According to China’s National Bureau of Statistics, China’s contribution to global economic growth last year was about 30%.

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