China faces a drawn-out struggle to revive an economy that suffered its biggest contraction since possibly the mid-1960s after millions of people were told to stay home to fight the coronavirus.To get more economy news today, you can visit shine news official website.
The world’s second-largest economy shrank by 6.8% from a year earlier in the quarter ending in March after factories, offices and shopping malls were closed to contain the outbreak, official data showed Friday. Consumer spending, which supplied 80% of last year’s growth, and factory activity were weaker than expected.
China, where the pandemic began in December, is the first major economy to start to recover after the ruling Communist Party declared the virus under control. Factories were allowed to reopen last month, but cinemas and other businesses that employ millions of people still are closed.There are signs that after an “initial bounce” as controls ended, “the recovery in activity has since slowed to a crawl,” said Julian Evans-Pritchard of Capital Economics in a report.
“China is in for a drawn-out recovery,” he said.The last contraction this big was 5.8% in 1967 during the upheavals of the ultra-radical 1965-75 Cultural Revolution, according to Iris Pang of ING.Forecasters earlier said China might rebound as early as this month. But they say a sharp, “V-shaped” recovery looks increasingly unlikely as negative export, retail sales and other data pile up.
Instead, they expect a gradual crawl back to growth in low single digits in the coming quarters. For the full year, forecasters including UBS, Nomura and Oxford Economics expect little to no growth.
In total, China has reported 4,632 deaths after the total for Wuhan, the city of 11 million people at the centre of the outbreak, was revised upward Friday. The mainland has announced 82,367 cases.
Retail sales fell 19% from a year earlier in the first quarter. That improved in March, the final month of the quarter, to a decline of 15.8%. But consumers, jittery about possible job losses, are reluctant to spend despite government efforts to lure them back to shopping malls and auto showrooms.
That is a blow to automakers and other companies that hope China will power the world economy out of its most painful slump since the 1930s.
Job-hunter Ni Hong’s challenge highlights the problem. Ni, 32, quit her job in Beijing in January to find a new one, but the virus disrupted those plans. Ni is paying her mortgage out of her savings and avoiding other spending while she looks in a market flooded with newly laid-off workers.
“In the past, there were maybe two or three candidates for a post,” Ni said. “Now, I have eight to 10 competitors, so the chance for me to be eliminated is much higher.”
That is a political challenge for the ruling party, which bases its claim to power on China’s economic success. The party appealed to companies to keep paying employees and avoid layoffs during the shutdown. But an unknown number have failed, adding to public anxiety.
