China’s economic collapse worse than expected
Unemployment rate surges amid Covid-19 pandemic
Predictions for the impact of the Covid-19 virus on the Chinese economy have been outstripped by the latest stats on the country's economic outlook.
Official data released by the Chinese government has revealed that industrial output in the world’s second-largest economy suffered its worst contraction on record, plunging by 13.5 per cent in the first two months of the year.
The National Bureau of Statistics found that retail sales fell by 20.5 per cent in the same period when compared with the year before, while fixed asset investment dropped by 25 per cent.
All three data points were much worse than analysts had expected and indicate that president Xi Jinping’s attempt to trigger an economic recovery in late February were vainglorious.
While they may have been surprised by the scale of the drop-off, no analysts would have been shocked by decline.
Having initially arrested those who spread the news of the novel coronavirus, Chinese authorities declared a state of emergency, imposing comprehensive widespread lockdowns.
While these measures kept the number of confirmed cases to below 81,000 and deaths to just above 3,200 in a country of more than 1.3 billion people, the nation’s economy essentially halted for two months.
With president Xi visiting the epicentre of Wuhan, the ruling Communist Party of China (CPC) has emphasised in the past week that the emerging superpower is getting back to work. Indeed, Mao Shengyong of the NBS stated: “from a comprehensive perspective, the impact of the viral disease is short term, external and manageable.”
Such optimism is not universal however, with investors and financial institutions braced for even worse figures in March and the first contraction in the Chinese economy since 1976.
In particular, observers have pointed to China’s surging unemployment rate as an indication that the recovery will not be immediate. Last week premier Li Keqiang stated: “A slight fluctuation in China’s economic growth this year is not of major significance as long as employment remains stable.” With urban unemployment rising to 6.2 per cent in February, such stability will be hard to obtain in the short term.
Despite major acts of stimulus from the People’s Bank of China (PBOC), which started even before the outbreak, the Shanghai Composite Index (SHCOMP) has fallen more than 8.5 per cent in 2020.
Furthermore, while Covid-19 may have peaked in China, the country’s economy will continue to be affected by its spread throughout the Western world, who are largely the consumers of its output.
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