China’s well-documented fight against the now-global COVID-19 pandemic shifted the country’s economic fortunes in a matter of months, compounding existing domestic financial uncertainty. Data released in early March confirms that after approximately two months of near-shutdown, the Chinese economy faces a long road to recovery.
China’s National Bureau of Statistics of China released January and February data for retail sales (down 20.5%), industrial output (down 13.5%), and Fixed Asset Investment (down 25%). Inward foreign direct investment grew 4% in January, but fell by 25.6% in February, according to the Chinese Ministry of Commerce. Overseas shipments, over the same time period, fell 17% year on year. Not surprisingly, economic growth projections for the year 2020 have plummeted, with some analysts projecting a contraction of up to 9% in the first quarter.
Economic authorities are, however, providing vast economic assistance to help exporters struggling with slow demand – announcing “fiscal, finance and export credit insurance measures, while supporting services firms accelerate work resumption.” The same release, from the commerce ministry, states that “China has the confidence and capability to achieve full-year targets on foreign investment” despite current economic conditions.
While China’s array of small businesses and service sectors are indeed suffering greatly, senior officials have cited positive “payment and settlement data” along with “improvement in terms of both cash flow and business activity” for corporate accounts, both indicators of potential economic recovery. Government action, reports Bloomberg, currently consists of “adjustments to tax policy, trimmed interest rates, cheaper loans, and extra liquidity.” Bloomberg Economics also projects that 85% of China’s factory and workplace activity has returned, as the country potentially moves slowly towards pre-COVID-19 normalcy.
Although China reported only one “local” infection of COVID-19 over the weekend, the threat of a so-called “second wave” exists. As well, the risk of international travellers “importing” COVID-19 back to China may rise as it spreads globally and Chinese citizens return home. Economic recovery, at least in China’s domestic sectors, likely hinges on the success of public health authorities in abating this potential reality.