Chinese economy takes massive Covid-19 hit, shrinks first time in decades

China’s gross domestic product stood at 20.65 trillion yuan (about $ 2.91 trillion) in the first quarter of 2020, down 6.8 percent year on year, data from the national bureau of statistics (NBS) showed Friday.

China’s economy shrank by 6.8 percent in the first quarter of 2020, government data showed on Friday, confirming the damage done to the second largest economy in the world by the coronavirus pandemic.

Reports said it was the first time that the Chinese economy had contracted since the Cultural Revolution, which ended in 1976. (AP)

China’s gross domestic product stood at 20.65 trillion yuan (about $ 2.91 trillion) in the first quarter of 2020, down 6.8 percent year on year, data from the national bureau of statistics (NBS) showed Friday.

Reports said it was the first time that the Chinese economy had contracted since the Cultural Revolution, which ended in 1976.

State media reports said the 6.8-percent contraction translated to an economic loss of about 1.44 trillion yuan ($203.4 billion), which is equivalent to the GDP of New Zealand.

The coronavirus first emerged China late last year, forcing the government to opt for an extensive countrywide shutdown of factories and businesses to contain the spread of the pathogen.

The Communist Party of China (CPC)-ruled government has restarted manufacturing across provinces but the raging pandemic has severely disrupted the supply chain in the first three months, impacting demand globally.

The impact of the pandemic on China’s foreign trade is expected to show in the second quarter with demand for goods from China – the world’s manufacturing hub – expected to plummet across the world.

The pandemic has infected more than 2 million globally and killed more than 130,000; China has reported more than 4000 deaths although new infections have dropped significantly from their peak in February.

“A breakdown of the data showed output of the service sector, which accounted for nearly 60 percent of the total GDP, dropped by 5.2 percent, while primary industry and the secondary industry saw a decline of 3.2 percent and 9.6 percent, respectively,” official news agency, Xinhua, said in a report.

Liu Xuezhi, an economist at the Bank of Communications, told the tabloid Global Times on Friday that though the March figures showed signs of easing, the rebound in March was also a bit “less than expected,” mainly because of the worsened pandemic situation globally.

“If the global COVID-19 situation continues to intensify, in the worst-case scenario, China’s second-quarter GDP may contract again or only show a slight increase of 1 to 2 percent,” Liu said.

“We expect (China’s) GDP growth to plunge in Q1 and stay negative in Q2; Beijing’s real stimulus package may be announced soon,” Nomura, a leading Japanese financial company, said.

“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 experts said in a note, quoted by Reuters.