The great fall of China’s economy: GDP set for historic plunge

[The_King]

The coronavirus that is now crushing demand for goods and services around the world first appeared in late December in China, and the country is getting set to announce what most analysts expect will be a historic contraction in economic activity.

After two months of a severe lockdown on people and businesses to curb the spread of the virus, economists fear that China's economy may have shrunk in the first quarter, the first time it has done so since records began. Beijing is due to announce the figures on Friday.

The world's second-largest economy, which already saw growth weaken to its slowest pace in almost 30 years in 2019, is expected to have shrunk by 6 percent in the first quarter of 2020, according to a consensus estimate of economists surveyed by data provider Refinitiv.

China has not recorded a three-month period of economic contraction since 1992 when it started publishing quarterly data on its gross domestic product (GDP), the sum value of all finished goods and services produced in a country.

The last time it recorded a full year of economic shrinkage was 1976, as the Cultural Revolution ended, according to World Bank data.

"Due to the protracted postponement of reopening of offices and factories in February, China's real GDP growth rate is estimated to contract sharply in [the first quarter of] 2020," Rajiv Biswas, Asia Pacific chief economist at IHS Markit told Al Jazeera. Real GDP growth figures take inflation into account.

Almost all the major economic indicators released over the last few weeks have pointed to a sharp slowdown in the first quarter, as China suffered the worst of the outbreak which began in the central city of Wuhan.

Data for January and February indicated that industrial production was badly disrupted, Biswas said, adding that the level of value added to goods and services - a measure of economic productivity - was weaker than the lowest reading during the 2008 financial crisis.

Exports also shrank in March, although the decline of 6.6 percent was slower than the 17.2 percent plunge over January and February.

Almost all sectors hit

 

"All major economic indicators contracted during the first two months of the year. Even sectors that were among the best placed to weather the COVID-19 disruption such as post, telecommunications and software have seen their sales drop," Julian Evans-Pritchard, senior China economist at Capital Economics said in a note to clients seen by Al Jazeera.

In particular, cinema revenue, long-haul travel, subway traffic and car sales will be worst hit, Capital Economics estimates show.

"The March data are unlikely to be any better," Evans-Pritchard said, forecasting a staggering 16 percent fall in China's GDP for the first quarter.

Not all experts are expecting a contraction, however. Iris Pang, Greater China economist at ING, forecast a 3.6 percent growth in China's GDP in the first quarter.

"March's activities recover quite well. Electricity consumption in March was higher than that in 2019, signalling that industrial production growth could be a positive year on year growth," Pang told Al Jazeera in an email exchange.

Other positives include tax and fee cuts that have been implemented since the outbreak of COVID-19 that would give revenue-starved businesses a much-needed lifeline, she said.

On Wednesday, the People's Bank of China (PBOC), the country's central bank, made its largest cut ever to the one-year interest rate at which it lends to banks. The 0.2 percentage point cut brought the rate to an all-time low of 2.95 percent.

"The move appears intended to lower funding costs for banks ... and encourage them to cut lending rates," said Evans-Pritchard.

Based on past decisions "banks are likely to pass on most of the decline in interbank rates to borrowers," he said.

China's central bank has already been aggressively cutting rates and pumping trillions of yuan (hundreds of billions of dollars) into money markets, and Capital Economics believes the PBOC will push rates down a lot further.

The Chinese government has also attempted to boost the economy by announcing various stimulus measures including credit support for firms and infrastructure investments.

Sectors including manufacturing, retail, the automotive industry, tourism and airlines all recorded declines in the first two months compared with a year ago, Biswas noted.

A better second quarter?

Things could look better for China in the second quarter as domestic demand drives a gradual recovery in growth, with the first quarter expected to be China's weakest in 2020, Biswas said.

"Large shopping malls have mainly reopened, and business operations have largely returned to normal in most Chinese provinces, with local governments in most provinces having relaxed restrictions on business operations."

Manufacturers have become more optimistic, as the Caixin China Manufacturing Purchasing Managers' Index rose from a record low of 40.3 in February to 50.1 in March. An index reading of above 50 indicates that producers are expecting an expansion in business activity.

"Further revenue improvement is expected during April as households have become gradually more confident about going to shops and restaurants," Biswas said.

The International Monetary Fund, while predicting that the world could experience a coronavirus-fuelled recession worse than the Great Depression of the 1930s, expects China will maintain positive growth of 1.2 percent in 2020.

ING's Pang expects 50 percent of domestic consumption will recover in the coming months as severe lockdowns are eased into less strict social distancing measures, and travel restrictions are lifted. "Social distancing's negative impact is lower than lockdown but it suppresses demand for going shopping," she said.

On top of that China also has plans to boost "new infrastructure", which should be pushed forward after social distancing measures are relaxed further, said Pang.

This could give a boost to GDP, she said, explaining that this new infrastructure would include big-data centres, 5G infrastructure, artificial intelligence, internet of things systems, and e-vehicle chargers.

But a full recovery may still be a long time coming. Exports are unlikely to recover anytime soon as the pandemic affects demand in the countries that consume the most of China's exports, Biswas said.

"The export sector will remain a drag during 2020 due to the deep recessions forecast in key export markets, notably the United States, European Union and Japan," he said.

Many will also be left unemployed due to the decline in business and factory activity because of the coronavirus outbreak, Pang said.

"These unemployed need time to find another job, and the aftermath of COVID-19 should be quite depressing for them."

"They themselves are consumers. So global demand will be very low, and will affect exports of China," she said.

SOURCE: AL JAZEERA NEWS

[aaur4man]

The title doesn't do the content justice though

 

China gonna emerge bigger when the demand levels surge back up as global importers resume business

[The_King]

Depending on one country is the worst, can hold ppl at will

[socrates469bc]

1 hour ago, aaur4man said:

The title doesn't do the content justice though

 

China gonna emerge bigger when the demand levels surge back up as global importers resume business

 

latest buzzword in international economics is re-shoring.

[aaur4man]

3 minutes ago, socrates469bc said:

 

latest buzzword in international economics is re-shoring.

 

Not sure how much US imports from China, although many other countries won't be looking to do so at least on a larger scale

[socrates469bc]

Just now, aaur4man said:

 

Not sure how much US imports from China, although many other countries won't be looking to do so at least on a larger scale

 

major economies ex-EU will be 'asking' their mncs to re-shore important manufacturing capabilities to ensure minimal supply chain disruption as seen during this episode.

 

tiko Trump will most likely arm-twist the american mncs to re-shore significant manufacturing capacity in the name of national security, more than the brits or nippons.

[aaur4man]

3 minutes ago, socrates469bc said:

 

major economies ex-EU will be 'asking' their mncs to re-shore important manufacturing capabilities to ensure minimal supply chain disruption as seen during this episode.

 

tiko Trump will most likely arm-twist the american mncs to re-shore significant manufacturing capacity in the name of national security, more than the brits or nippons.

 

He really stop at nothing to pull out biz from China 

 

 

[socrates469bc]

1 minute ago, aaur4man said:

 

He really stop at nothing to pull out biz from China 

 

 

 

in a way, he has to.

 

imagine if the gm and ford moved half of its current manufacturing capacities to mexico, he would not have been able to secure needed ventilators or essential materials during emergencies.

 

unfortunately, ah dou loong doesnt see this scenario and placed all his money on casino economy.

 

sgp economy is screwed for the next 5-10 yrs.

[The_King]

17 minutes ago, aaur4man said:

 

He really stop at nothing to pull out biz from China 

 

 

WTF, you first day know trump?

 

trump is The president of the United States not the The president of the china

 

 

not 

[aaur4man]

21 minutes ago, socrates469bc said:

 

in a way, he has to.

 

imagine if the gm and ford moved half of its current manufacturing capacities to mexico, he would not have been able to secure needed ventilators or essential materials during emergencies.

 

unfortunately, ah dou loong doesnt see this scenario and placed all his money on casino economy.

 

sgp economy is screwed for the next 5-10 yrs.

 

Won't be that jialat I feel. But I kinda think the direction they are heading, we don't have skilled workers for that. Again need foreigners liao

Edited April 17, 2020 by aaur4man

[socrates469bc]

37 minutes ago, aaur4man said:

 

Won't be that jialat I feel. But I kinda think the direction they are heading, we don't have skilled workers for that. Again need foreigners liao

 

unfortunately, the global economy is heading into a winter for the foreseeable 2 yrs and therefore sgp will have a tough 5 yrs ahead assuming that there is a gradual resumption of economic growth by the third yr and beyond.

 

air travel is finito, casino is finito, international trade financing is finito in sgp.

 

the first 2 r labor intensive service industries while the later is the most profitabke.

 

net ic exports of ard usd30bln will not be able to absorb these newly unemployed low skilled workers.

 

the economic policies under ah dou loong have been critiqued by many economic growth sexperts as st since 2004, but no one listened during the good times.

 

now these st myopic economic policies r going bite back with a vengeance.

 

wahahahahha

[aaur4man]

25 minutes ago, socrates469bc said:

 

unfortunately, the global economy is heading into a winter for the foreseeable 2 yrs and therefore sgp will have a tough 5 yrs ahead assuming that there is a gradual resumption of economic growth by the third yr and beyond.

 

air travel is finito, casino is finito, international trade financing is finito in sgp.

 

the first 2 r labor intensive service industries while the later is the most profitabke.

 

net ic exports of ard usd30bln will not be able to absorb these newly unemployed low skilled workers.

 

the economic policies under ah dou loong have been critiqued by many economic growth sexperts as st since 2004, but no one listened during the good times.

 

now these st myopic economic policies r going bite back with a vengeance.

 

wahahahahha

 

Casino should convert to some engineering, manufacturing plant or agriculture farm

 

Aviation now really 4896 Alot Alot of ppl are pushing for it to reopen

 

At the same time Alot of stimulus is given to airline 

[The_King]

1 hour ago, socrates469bc said:

 

unfortunately, the global economy is heading into a winter for the foreseeable 2 yrs and therefore sgp will have a tough 5 yrs ahead assuming that there is a gradual resumption of economic growth by the third yr and beyond.

 

air travel is finito, casino is finito, international trade financing is finito in sgp.

 

the first 2 r labor intensive service industries while the later is the most profitabke.

 

net ic exports of ard usd30bln will not be able to absorb these newly unemployed low skilled workers.

 

the economic policies under ah dou loong have been critiqued by many economic growth sexperts as st since 2004, but no one listened during the good times.

 

now these st myopic economic policies r going bite back with a vengeance.

 

wahahahahha

 

Which mean exciting the next 5yr, can watch how what will they do

 

 

remind me of this song again

 

 

Economic winter 
Whatcha want, watcha want
Whatcha gonna do
When Economic winter come for you
Tell me
Whatcha wanna do, whatcha gonna dooo
Yeaheah

Economic winter , Economic winter 
Whatcha gonna do, whatcha gonna do
When they come for you

Economic winter , Economic winter 
Whatcha gonna do, whatcha gonna do
When they come for you

When you were  asset inflation
And you had  monetary excesses 
You go to stagflation/stagnation
And learn the golden rule
So why are you
Acting like a kondratiev wave
If you get  monetary excesses 
You must get stagflation/stagnation

[The_King]

1 hour ago, aaur4man said:

 

Casino should convert to some engineering, manufacturing plant or agriculture farm

 

Aviation now really 4896 Alot Alot of ppl are pushing for it to reopen

 

At the same time Alot of stimulus is given to airline 

i thought we aready got hydro farm, till now no sound

[aaur4man]

28 minutes ago, The_King said:

i thought we aready got hydro farm, till now no sound

 

no news dont think it big enough a farm

[socrates469bc]

1 hour ago, The_King said:

i thought we aready got hydro farm, till now no sound

 

1 hour ago, aaur4man said:

 

no news dont think it big enough a farm

 

panasonic been doing high tech farming since 2014.

 

just that it is not sexy enough for ah dou loong.

 

https://www.reuters.com/article/us-panasonic-singapore-farming/electronics-giant-panasonic-wants-singaporeans-to-eat-its-veg-idUSKBN0G30R720140803