- Plunges in official and private sector purchasing managers’ indices amid the coronavirus outbreak prompted sharp revisions of economic forecasts
- Analysts expect China to enact additional fiscal and monetary stimulus but stop short of massive support enacted after the global financial crisis in 2008
The odds are rising that China will report a sharp deceleration in growth – or even a contraction in the first quarter as a result of the impact of the coronavirus epidemic.
A contraction in first quarter growth would be the first since the end of the Cultural Revolution in 1976.
If China still wants to achieve an average 5.6 per cent growth for 2020, it would have to engineer a growth rate of as high as 12.7 per cent in the second half of the year, according to the report by Bert Hofman, Sarah Tong and Li Yao.
“The question is whether this is feasible and whether the consequences in terms of increased debt and potentially less productive investment are worth the price,” according to the report.
insisted last week that China would realise the vision of building up a “comprehensively well-off” society by 2020, an inheritance from China’s former paramount leader Deng Xiaoping and a major gauge of progress to realise Xi’s grand “Chinese dream” by the middle of the century.
on the rest of the world, particularly South Korea, Japan and Italy, who are all major trading partners.
It will be extremely difficult, to say the least, to meet the annual growth targets for 2020 set previously. It would require massive, unreasonable amounts of stimulus, if it is at all possible, given the headwinds
“It will be extremely difficult, to say the least, to meet the annual growth targets for 2020 set previously. It would require massive, unreasonable amounts of stimulus, if it is at all possible, given the headwinds,” Kuijs said.
Instead, it would “make much more sense” for the Chinese leadership to play down the need to literally meet the previously set economic target,” he added.
Beijing’s social and economic development targets for this year have not yet been made public, even though Xi has pledged that the government would still achieve them despite the challenge posed by the virus outbreak.
The full-year targets covering growth, employment and inflation are usually released at the National People’s Congress, the ceremonial gathering of China’s legislature in early March, but this key annual event has been postponed due to the threat of the coronavirus, which has infected over 80,000 people and killed more than 2,900 in the country as of Tuesday.
China’s National Bureau of Statistics is due to publish first quarter GDP growth data in mid-April, with combined industrial production, retail sales and fixed-asset investment data for January and February due next week.
They will offer a clearer picture of how much the coronavirus epidemic has damaged China’s growth in the first two months of this quarter, although the damage it has caused in China and the rest of the world is hard to measure because the epidemic is still evolving.
Production among manufacturing companies across China, except in the virus epicentre of Wuhan, Hubei province, have been gradually returned to normal, with firms that have close ties to local governments and access to financial resources resuming production faster than the much larger number of small businesses.
had restarted production as of the middle of last week, an increase of just 3.2 percentage points from three days earlier. But even among the larger enterprises the government is trying to help, many are not running at full capacity due to disrupted logistics that have impeded the delivery of raw materials to factories and finished products to customers.
Foxconn, which assembles most of Apple’s iPhones in China, said normal production is not expected to resume until the end of March.
China, though, has limited its economic aide policies to “targeted” fiscal and monetary moves, avoiding the massive stimulus it undertook in 2008 in response to the global financial crisis that led to the negative side-effects of high debt and unproductive investments.
[China] will be cautious about the scale of any intervention. The size of the stimulus will likely depend on how quickly economic activity recovers on its own
Andy Rothman, a San Francisco-based strategist for investment fund Matthews Asia and a long-time watcher of the Chinese economy, said China will report a sharp fall in economic activity in the first quarter and that it “is prepared to implement a stimulus”.
“But [China] will be cautious about the scale of any intervention. The size of the stimulus
CHINDIA ALERT: You'll be living in their world, very soon 