China’s economy skids as virus immobilises factories
BEIJING: China’s factory production plunged at the sharpest pace in three decades in the first two months of the year as the fast-spreading coronavirus and strict containment severely disrupted the world’s second-largest economy.
Urban investment and retail sales also fell sharply and for the first time on record, fanning views China’s economy probably stalled or even shrank in the first quarter and that authorities would need to do more to resuscitate activity.
“Judging by the data, the shock to China’s economic activity from the coronavirus epidemic is greater than the global financial crisis,” said Zhang Yi, chief economist at Zhonghai Shengrong Capital Management.
“These data suggest a small contraction in the first-quarter economy is a high probability event. Government policies would need to be focused on preventing large-scale bankruptcies and unemployment.”
Industrial output fell by a much larger-than-expected 13.5 per cent in January-february from the same period a year earlier, data from the National Bureau of Statistics (NBS) showed on Monday.
That was the weakest reading since January 1990 when Reuters records started, and a sharp reversal of the 6.9 per cent growth in December. The median forecast of analysts polled by Reuters was for a rise of 1.5 per cent, though estimates varied widely.
The dire numbers also showed shocking weakness in the property sector and have prompted some analysts to further cut their forecasts on first-quarter economic performance, which were already pointing to a dramatic slowdown.
They may also mean Beijing needs to rethink its economic growth target for 2020.
China has yet to publicly issue its target, which would ordinarily be announced at the start of the annual parliament meeting. That meeting was originally scheduled for March 5 but was postponed due to the outbreak. Sources have said policymakers are debating whether to lower the planned annual growth target of around 6 per cent, which was tentatively agreed late last year.
The Global Times on Monday quoted Wei Jianguo, vice head of the China Centre for International Economic Exchanges, a think-tank, as saying that China’s 6 per cent growth goal for 2020 remained intact.
However, many private-sector economists see that as already well beyond China’s reach.
“Don’t even think about it,” said Hao
Hong, head of research at BOCOM International. “Even though China goes all in with stimulating policies in the property sector and infrastructure, that’s still mission impossible.”
The NBS in a statement on Monday said the impact from the coronavirus epidemic is controllable and short-term and that authorities would strengthen pro-growth policies.
Mainland China has seen an overall drop in new coronavirus infections, but major cities such as Beijing and Shanghai continued to wrestle with cases involving infected travellers arriving from abroad, which could undermine China’s virus fighting efforts. However, analysts warn it could take months before the economy returns to normal.
* Coronavirus outbreak caused severe economic
disruptions * Output, retail sales fall in January-february,
dashing expectations for gains * Many key economic indicators post worst
contractions on record * Could take months to normalise, fresh global
worries weigh