For one, I’m glad that I’m not a Chinese citizen given President Xi Jinping’s ‘requirement’ for the year-end goal to be double the overall level of GDP. It will undoubtedly prove interesting to see what austere measures are put in place to ‘motivate’ the industrial, construction and service sector employees prevented from working by the pandemic to reach his targets!
I guess of most significance here is that it is from 1992, when China started recording quarterly figures, that for the first time in decades we have seen China’s economy shrink. Some of you may recall that just 12 months ago, in the first quarter of 2019, China experienced a healthy economic growth of 6.4% and that was during a period it was enduring a trade war with the USA.
When the economy contracted by almost 7% in the first quarter of 2020, as direct result of the covid-19 virus forcing businesses and factories to shut down, the rest of the world watched on with concern as the second largest economy found their markets constricted.
Inevitably these concerns throughout the rest of the world are based on the fact that they will be next to pay the financial price of coronavirus. The Chinese economy has long been perceived as a major economic powerhouse being a major producer and consumer of services and goods, so when Yue Su at the Economist Intelligence Unit was quoted saying " The GDP contraction in January-March will translate into permanent income losses, reflected in bankruptcies across small companies and job losses. ” he was pretty much telling the fortune of all the other world economies.
To get some idea of the spread of this downturn, we know that of the 41 measured key industrial sectors within China - ranging from oil and gas industries, chemicals, car production, metal products, machinery and equipment, food manufacturing and processing and so forth - all but four reported losses. These four were the oil and gas exploitation, the non-ferrous metals, processing of non-staple agricultural goods and tobacco processing sectors.
As if to add salt to this financial wound, the rest of the world so heavily dependent on China for their exported goods (exports account for around one-fifth of China’s economy) is now also reeling from the effects of the pandemic. Their economies have slowed down under their various containment measures, and the subsequent demand for Chinese products has declined thereby sending a second economic shock wave out to hit China.
With this being the Chinese year of the rat, an animal seen as a sign of wealth and surplus in Chinese culture, it will be interesting to see if the ancient astrological beliefs have any credence!