The Chinese economy shrank by 6.8% in the first quarter of 2020-’21, due to the coronavirus pandemic ravaging parts of the country in January and February, The South China Morning Post reported on Friday. This is the first time the Chinese economy has shrunk since the end of the Cultural Revolution in 1976.
Unlike India, China’s financial year begins in January and ends in December. New data released by the National Bureau of Statistics confirmed the slump, which was worse than what a group of Bloomberg analysts had predicted earlier this month.
The industrial production, fixed asset investment and retail sectors failed to recover in March from the devastation of January and February, the National Bureau of Statistics said.
Industrial production – a gauge of manufacturing, mining and utilities – fell by 1.1% in March after collapsing by 13.5% in January and February. Retail sales declined by 15.8% in March, after declining by over 20% in the first two months. Fixed asset investment, on the other hand, fell by 16.1% over the first three months, from an all-time low of minus 20.5% in January and February. Analysts had predicted a slump of 15.1%.
On a quarter-on-quarter basis, the Gross Domestic Product collapsed by 9.8% in the January-March quarter, compared to a predicted fall of 9.9%.
Japanese financial holding company Nomura told Reuters that it expected the Chinese government to soon provide the economy a stimulus package. “However, unlike previous easing cycles, when most of the new credit went to finance spending on infrastructure, property and consumer durable goods, this time we expect most of the new credit to be used on financial relief to help enterprises, banks and households survive the Covid-19 crisis,” Nomura said in a note.
The International Monetary Fund had said on April 14 that most world economies are likely to contract in the 2020 calendar year, intensifying a global recession comparable only to the 1929-’33 Great Depression. However, the fund had predicted that India and China would see positive growth.
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