COVID-19 causes China’s biggest 30-year industrial production low

By Javier Triana

Beijing, Mar 16 (efe-epa).- China’s industrial production plummeted 13.5 percent year-on-year in the first two months of 2020, its worst decline in 30 years, due to the impact of the novel coronavirus pandemic, the country’s national statistics office Monday.

The figure – well below analysts’ forecasts, who predicted about a 1.5 percent growth – is the worst for industrial production since January 1990’s 21.20 percent drop, when the statistics were first gathered. It shows COVID-19’s impact in China not only at a human level but an economic one.

“While domestic conditions should improve slowly in the coming months, the mounting global disruption from the coronavirus will hold back the pace of recovery,” analyst Julian Evans-Pritchard of British consultancy firm Capital Economics said in a report, adding that the data had been much weaker than expected and pointed to a deeper recession than that of the 2008 global financial crisis.

This drop is a stark contrast to December data, which showed that Chinese industrial production increased by 6.9 percent year-on-year.

Industrial production measures the activity of large companies with a minimum 20 million yuan (about $2.86 million) annual turnover.

Manufacturing production fell by 15.7 percent in the same period, due to the 6.5 percent drop in production in the mining sector.

Products of which manufacturing did grow in January and February are face masks (127.5 percent), smartwatches (119.7 percent), frozen meat (13.5 percent) and instant noodles (11.4 percent), highlighting the demand caused by prevention measures against the virus.

Retail sales fell 20.5 percent year-on-year, according to the statistics office.

The agency also offered China’s fixed-asset investment data Monday, which plunged 24.5 percent compared to the same period last year.

These are not the first figures to anticipate an economic slowdown: the manufacturing industry registered its worst figure in February since the official historical series began in 2005, when its benchmark purchasing manager index indicator fell 14.3 points up to 35.7.

In November 2008, when the world was facing the financial crisis, that indicator read 38.8 points.

China’s international trade figures were also part of the plunge, and in the first two months of the year dropped 9.6 percent year-on-year.

The Hong Kong Stock Exchange has not been spared either, and although it started the year above 25,000 points, it closed Monday at slightly above 23,000 points.

However, the Chinese government insists on the robustness of its economy and said the impact will be temporary and limited.

According to Evans-Pritchard, “the March data are likely to be even worse.”

“Admittedly, the high-frequency data we track show that economic activity has started to recover gradually in recent weeks,” he said. “But the slump in February was diluted in the data by being averaged with January, when most of the disruption had yet to be felt.”

Evans-Pritchard said the unemployment rate increase from 5.2 percent to 6.2 percent would weigh on consumer spending even with the progressive disappearance of interruptions the virus created.

British consultancy Oxford Economics said it foresaw a recovery in GDP in the next three quarters after the collapse of the first quarter, but that recovery would be constrained by prolonged domestic demand weakness, especially given the increase in outbreaks worldwide.

It added that this pointed to very meager growth prospects in China in 2020. EFE-EPA

Related Articles

Back to top button