Due to COVID-19 Impact, China's First Quarter Sees Negative Growth... Q1 at -6.8% (Update)

[Asia Economy Beijing=Special Correspondent Park Sun-mi] Due to the impact of the novel coronavirus infection (COVID-19), the Chinese economy contracted for the first time in 44 years since 1976.

On the 17th, the National Bureau of Statistics of China announced that the economic growth rate for the first quarter was -6.8%. The year 1976 was when the Cultural Revolution led by Mao Zedong ended, and at that time, China's economic growth rate was -1.6%. It is also the first official negative growth rate since the government began releasing quarterly economic growth rates separately in 1992.

The negative growth in the first quarter was anticipated after the COVID-19 infection began to spread in Wuhan, Hubei Province in January. As the virus spread nationwide, population movement was restricted and cities were locked down in China. Factory operations were also suspended, adversely affecting the economy. To prevent the spread of COVID-19, China extended the Spring Festival (Chinese New Year) holiday, originally from January 24 to 30, until February 2. Even after that, as the spread of COVID-19 did not subside, all efforts were focused on COVID-19 prevention, enduring the suspension of economic activities.

The first quarter growth rate fell short of forecasts by private and foreign media. Caixin, a Chinese private economic media outlet, projected the first quarter growth rate to be between 0% and -11.5%, while The New York Times cited a survey of 57 analysts by Reuters, presenting an average first quarter growth rate of -6.5%.

Considering that China has sustained high growth for over 40 years since adopting the reform and opening-up policy in 1978, the impact of this negative growth rate is expected to be significant. China recorded a growth rate of 15.2% in 1984 and has shown stable and sustainable growth with single-digit growth rates since 2010, reflecting an expansion in economic scale.

The economic indicators released on the same day also showed that the Chinese economy has not yet recovered from the shock of COVID-19.

Industrial production in March decreased by 1.1% year-on-year, improving from the 1-2 months period (-13.5%) but still continuing the downward trend. Retail sales also fell by 15.8%, and fixed asset investment decreased by 16.1%. Earlier released March export data showed a 6.6% year-on-year decline, indicating that the three pillars driving the Chinese economy?exports, consumption, and investment?have all been impacted by COVID-19. The urban unemployment rate in March was 5.9%.

Companies across most sectors, including consumer electronics, automobiles, food and beverages, entertainment, and tourism, are forecasting sharply decreased first quarter earnings due to COVID-19. Bloomberg estimated that the first quarter net profits of large listed companies comprising the CSI300 (Shanghai-Shenzhen 300) index would decrease by 18% year-on-year, and the components of the ChiNext board, known as the "Chinese Nasdaq," would see a 25% decline in net profits.

Liu Yuanchun, Vice President of Renmin University of China, said, "It is important for China to set appropriate economic growth targets and establish feasible and efficient policy measures," adding, "To achieve the goals of the 13th Five-Year Plan (2016?2020), the economic growth rate in 2020 should not fall below 5.5%."

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