By Robin Brant, BBC News, Shanghai
The huge decline shows the profound impact that the virus outbreak, and the Chinese government’s draconian reaction to it, had on the world’s second largest economy. It wipes out the 6% expansion in China’s economy recorded in the last set of figures at the end of last year.
Beijing has signalled a significant economic stimulus is on the way as it tries to stabilise its economy and recover. Earlier this week the official mouthpiece of the ruling Communist Party, the People’s Daily, reported it would “expand domestic demand”.
But the slowdown in the rest of the global economy presents a significant problem as exports still play a major role in China’s economy. If it comes this will not be a quick recovery.
On 16 April, the International Monetary Fund (IMF) forecast China’s economy would avoid a recession but grow by just 1.2% this year. Job figures released recently showed the official government unemployment figure had risen sharply, with the number working in companies linked to export trade falling the most.
China has unveiled a range of financial support measures to cushion the impact of the slowdown, but not on the same scale as other major economies. “We don’t expect large stimulus, given that that remains unpopular in Beijing. Instead, we think policymakers will accept low growth this year, given the prospects for a better 2021,” said Louis Kuijs, an analyst with Oxford Economics.
Since March, China has slowly started letting factories resume production and letting businesses reopen, but this is a gradual process to return to pre-lockdown levels.
China relies heavily on its factories and manufacturing plants for economic growth, and has been dubbed “the world’s factory”.
Stock markets in the South East Asia region showed mixed reaction to the Chinese economic data, with China’s benchmark Shanghai Composite index up 0.9%. Japan’s Nikkei 225 jumped 2.5% on Friday, although this was largely due to gains on Wall Street after US President Donald Trump unveiled plans to ease lockdowns.
