China’s economic output shrank at the start of the year as COVID-19 tore through the country, marking the first time the Chinese economy has contracted since official records began.
Chinese GDP fell by 6.8% in the first quarter of 2020 when compared with a year earlier, officials said on Friday 17 April. Output shrank by 9.8% when compared with the final three months of 2019.
It marks the first time since China began reporting quarterly growth figures in 1992 that the economy has shrunk. It’s also the first time China has officially acknowledged a year-on-year fall in growth since 1972, according to the Financial Times.
The slump in economic activity follows the outbreak of novel coronavirus at the start of the year. The current pandemic first began in China in late 2019 and COVID-19 began spreading rapidly in the Chinese city of Wuhan in January 2020. Efforts to contain the deadly virus led authorities to lockdown Wuhan and other parts of Hubei province in late January.
Wuhan is an industrial hub in Central China home to 11 million people. Factories were closed as part of the lockdown and Wuhan only reopened last week after over 70 days of shutdown. Other Chinese cities also faced restrictions as COVID-19 spread through the country.
Stock markets were resilient on Friday despite the Chinese data. China’s Shanghai Composite index (000001.SS) closed up 0.6% and the Hong Kong Hang Seng index (^HSI) rose by 1.5%. Shares rallied across Europe.
Investors had widely expected the Chinese data to show a sharp fall in activity and Hugh Briscoe, a global fixed income portfolio manager at Goldman Sachs Asset Management, said there was greater focus on how China recovers from the slump.
“Weakness was expected and is in line with signals of economic health provided by higher-frequency data including daily coal consumption, public transport ridership, traffic congestion and property sales,” Briscoe said.
“Investors are focused on the pace at which economic activity will return to normal given China’s prominence in the global economy — it is the world’s largest trading partner.
“China’s recovery is also being closely watched given its potential to serve as a template for growth paths elsewhere.”
Separately on Friday, Wuhan increased its official death toll from the COVID-19 by 50% to 3,869. Officials blamed the under counting on delays and testing shortfalls during the outbreak, Reuters reported citing state-run TV.