Economic damage in China is worse than anticipated — factory production experienced its fastest downward spiral in 30 years, according to the National Bureau of Statistics (NBS) on Monday (March 16).
“China’s containment of the epidemic is bearing fruit, but there is a challenge ahead in controlling the spread in other countries,” the National Bureau of Statistics Spokesman Mao Shengyong said following the release of the data. “Growth of the global economy and trade may slow to some extent, which will exert some impact on China’s economic growth.”
In January and February, the Index of Services Production dropped by 13.0 percent year on year, and total retail sales of consumer goods dropped to 5,213 billion yuan, a year-on-year decline of 20.5 percent, a statement from the NBS indicated.
“The second quarter is going to see a significant rebound from the first quarter,” Mao added. “As the policy effects become more visible, with more potent measures in the next step to counter the shock, we expect that the economy will be more sound in the second half of the year.”
The Central Bank lowered the minimum cash a lender had to keep in reserve, while the government pumped $14.3 billion into the financial system with the offer of one-year medium-term lending facility loans. Retail sales dropped 20.5 percent and fixed-asset investments fell 24.5 percent. The unemployment rate surged 6.2 percent in February, a new record high.
“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, told Reuters.
“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,” Yi added.
Zhang Wenhong, an infectious disease expert from Shanghai, said China has moved passed the worst of the coronavirus but the fallout would continue through the summer.
The release of China’s economic data comes as new coronavirus cases in the country drop and the number of worldwide infections skyrockets.
The global death toll for the pandemic has surpassed 6,500 worldwide, and the number of cases is over 152,000. China has had the most cases, with 80,844, followed by Italy with 21,157. The U.S. has 1,678 cases and 41 deaths as of Monday (March 16).
The Federal Reserve announced on Monday (March 16) that it was slashing benchmark interest rates to zero.