Business activity in China turned broadly negative for the first time on record as home sales, construction activity, retail sales and factory output plunged, pushing unemployment to a record high, signs of the costly economic damage associated with trying to control the spread of the coronavirus.
Coronavirus deals China’s economy a ‘bigger blow than global financial crisis’
China has suffered even deeper economic damage from the coronavirus pandemic than predicted, with figures released by the National Bureau of Statistics (NBS) on Monday showing factory production inside the country dropped at the fastest pace seen in three decades.
Financial analysts have said the economic impact of the pandemic may have cut China’s growth in half during the first quarter.
Industrial output fell 13.5% in January-February, compared with 2019, which ING economist Iris Pang told AFP was the first contraction since January 1990, when industrial production shrank 21.1%.
China’s economy suffers dramatic collapse in January, February in warning to rest of world
The coronavirus’ impact on China’s economy was made plain in new numbers released on Monday, which showed a dramatic collapse across the board.
Amid a widespread shutdown of manufacturing operations, industrial production – a measure of manufacturing, mining and utilities activity – declined by 13.5 per cent over the first two months of the year, combined data for January and February showed.
This was the first decline on record, although ordinarily the data is released monthly. But the numbers were well below expectations of a 3.0 per cent decline.
Retail sales, a key metric of consumption in the world’s second largest economy, fell by 20.5 per cent, again the first decline on record. This was well below the median forecast of a group of analysts, conducted by Bloomberg, which predicted a 4.0 per cent contraction.
Fixed asset investment – a gauge of expenditure on items including infrastructure, property, machinery and equipment – collapsed by 24.5 per cent, much worse than analysts’ predictions of minus 2.0 per cent. This was the first shrinkage on record.
Roughly 5 million people in China lost their jobs in the first 2 months of 2020
Roughly 5 million people in China lost their jobs amid the outbreak of the new coronavirus in the first two months of this year, according to data published Monday.
China’s official, but highly doubted, urban unemployment rate jumped in February to 6.2%, its highest on record, the National Bureau of Statistics said. That’s up from 5.3% in January and 5.2% in December.
“It’s pretty meaningful, as over 5 million more workers lost (a) job in the past two months,” Larry Hu, chief China economist at Macquarie, said in an email.
As of the end of last year, 442.47 million people were employed in urban areas, government data show, indicating that at least 4.67 million people have since lost their jobs, based on official figures.
China’s unemployment data have been highly doubted, even after the country changed its methodology from worker claims to a survey in 2018 in an effort to capture more of the job losses. The urban unemployment rate has hovered near 4% to 5% for the last 20 years.
China’s Economy Heading for Historic Reverse, Reflecting Virus Impact
An historic shift into reverse gear for the Chinese economy could be one of the next consequences flowing from the spread of the novel coronavirus. That prospect threw Asian stock markets into reverse on Monday, despite economic stimulus measures in the U.S.
The pain being incurred by Chinese businesses was reflected in additional share price losses for Alibaba and Tencent. The Hong Kong-traded units of Alibaba dropped 5% on Monday to HK$182.10, while Tencent fell 4.2% to HK$349.60.
There was no new bad news for China’s media sector. But the longer that mainland cinemas stay shut, the deeper the problems become for companies including: Wanda Film (whose shares were down 4.4% to CNY17.12); China Film Co. (down 2.4% to CNY12.96); and Huayi Brothers (down 3.5% to CNY3.77). Hong Kong-traded Imax China on Monday fell 3.5% to HK$13.94.
Coronavirus devastates China’s economy and the ‘nightmare’ is not over
The data for March could be even worse.
“The slump in February was diluted in the data by being averaged with January, when most of the disruptions were yet to be felt,” said Julian Evans-Pritchard, senior China economist for Capital Economics.
Larry Hu, chief China economist for Macquarie Group, said his “best guess” is that China’s $14 trillion economy will contract by 6% in the first quarter, compared with the same period a year ago.
“Now it is clear it would be the worst in almost 50 years,” he said. The last time China experienced a shrinking economy was in 1976, when Communist Party leader Mao Zedong’s death ended a decade-long social and economic tumult in China.
The hit to the Chinese economy in the first quarter was “devastating,” according to Ting Lu, chief China economist for Nomura. “In our view, the only question is how negative [Q1 GDP] will be.”
“This is not the end of the nightmare,” Iris Pang, chief Greater China economist for ING, said in a report on Monday.
Edited by staff