The economic disaster of the coronavirus pandemic caused China’s economy to shrink 6.8 percent in Q1 – the all-time worst on record – calling it a sign of things to come for the rest of the global economy.
The world’s second-largest economy posted its first-ever recorded quarterly economic contraction (9.8 percent decrease quarter-on-quarter). In the Hubei, the epicenter of the outbreak, the economy posted a 39.2 percent year-on-year plunge, according to the province’s statistic bureau.
More than just the morbidity of a collapse that may have seen its bottom, it will be critical to study China and its eventual path to recovery and normalization, especially for unfortunate economies that are still ways off from reopening from lockdowns. What say the banks about the -6.8 percent drop?
VP: «A Noose Around the Chinese Economy’s Neck»
«Such a sharp decline in GDP has never before been recorded in Chinese statistics,» said VP Bank’s chief economist Thomas Gitzel, citing a 15.8 percent month-on-month decrease in retail sales. «The coronavirus put a noose around the Chinese economy's neck.»
Despite ample support from governments and central banks, Gitzel said it would be «naive» to assume any such moves would sufficiently compensate damages and to expect bankruptcies, including of larger companies.
«China's GDP figures clearly show how painful the economic crash is becoming in Europe and also in the U.S.A.,» Gitzel added. «The coronavirus will bring the global economy to its knees in the first half of 2020. There will be no rapid return to a normal state.»
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