China economy shrinks by 7%, first drop since the 1970s
- China's economy shrank by 6.8% in the first three months of 2020, signaling gloom for the country where the novel coronavirus emerged before spreading around the world.
- China's National Bureau of Statistics released economic data Friday showing major economic indicators declined across industrial production, retail sales, investments, and imports and exports.
- On news of the data, the American economist Nouriel Roubini remarked that the collapse in the first quarter was "staggering," while one investor described the contraction as an "extraordinary shock."
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China's economy shrank in the first quarter of 2020, its first contraction since 1992, as production and spending were frozen by the country's coronavirus lockdown.
The National Bureau of Statistics reported on Friday that gross domestic product fell by 6.8% during the period. That puts it on pace for a full-year contraction, something that hasn't happened since the 1970s, according to multiple news outlets.
The sharp contraction reflects the weakness in consumer spending and investor confidence while the coronavirus has flattened economies around the world. The central Chinese city of Wuhan, where the virus first emerged, revised its death toll on Friday from 2,579 fatalities to 3,869 - a jump of about 50%.
The economic data released on Friday showed that industrial production fell by 1.1% year-on-year, retail sales of consumer goods fell 19%, investment in fixed assets fell by 16.1%, and imports and exports were down by 6.4% - all worse than estimated.
China was keen, however, to present positives, saying that overall national economic and social development in the first quarter was stable despite the outbreak of Covid-19.
"The result modestly is on the rosy side of what we believe actually happened in Q1," said Miguel Chanco, senior Asia economist at Pantheon.
"But the official data were very close to the reality in the grand scheme of things, and that should be welcomed, despite the damning picture they paint," he said of China's statistics.
- Chanco also said that analysts at Pantheon expect a full-year contraction, although he noted that "official headlines are unlikely to show that."
American economist Nouriel Roubini remarked on Friday that the decline in China's GDP is a "depression rate of economic collapse." Roubini noted that the start of April showed positive economic growth for the country but the collapse in the first-quarter was "staggering."
"A 6.8% drop in GDP is an extraordinary shock to the Chinese economy, and by implication the rest of the world," said Richard Pearson, director at investment platform EQi.
Pearson suggested that China's data is an important indicator in considering the potential impact for the West while it is still in the throes of the pandemic. He said he believes the impact would be more severe on the West due to the difference in nature of government responses, which seemed to have resulted in lower recorded deaths in China.
Connor Campbell, a financial analyst at SpreadEx, had a different view. He said that "given some analysts were expecting a first quarter [China] contraction of nearly 11%, there is perhaps a paper-thin reason to take a chirpy view of the data."
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