China’s awakening

Chart of the week

China has released both its first quarter GDP estimate and economic data for March. First quarter GDP is estimated to fall by anannualised 33.8% (-6.8% YoY) following a 6.1% increase in the last quarter of 2019 (+6.0% YoY).

Meanwhile, monthly statistics are bouncing back. Year-on-year, industrial production went from a 13.5% contraction in January–February to -1.1%, retail sales from -20.5% to -15.8% and investment spending from   -24.5% to -9.3%. Contraction in both housing sales and building starts also slowed down as well.

Our analysis

China’s first quarter GDP contraction looks dramatic, but is not extremely significant in that it simply reflects the impact of plant closures and lockdown measures. Monthly data are proving more interesting as they provide information on the pace of China’s economic recovery.

Broadly speaking, there seems to be good progress towards business as usual in industry and real estate, which confirms what could already be seen in daily data such as electricity usage and housing sales.

In contrast, the recovery in consumer spending looks sluggish amid deteriorating households’ purchasing power (-3.9% YoY in Q1 2020) and job creations slowing down (2.29 million in Q1 2020). Despite few new cases of Covid-19 reported, increased consumer caution cannot be ruled out.

China’s recovery can be expected to continue in the months ahead, but the decline in global demand remains a significant risk. In response, the Chinese authorities could implement further stimulus measures.


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The opinion expressed above is dated 17 April 2020, and liable to change.


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