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A worker works at the construction site of a cross-lake bridge in Anqing, east China's Anhui Province. Photo: Xinhua
Opinion
SCMP Editorial
SCMP Editorial

China faces long road to recovery in wake of pandemic carnage

  • First economic contraction since the Cultural Revolution may not be unexpected, but it spells tough times ahead for nation that must maintain disease vigilance
SCMP Editorial
SCMP Editorial
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China’s 6.8 per cent economic contraction in the first quarter was the first since the end of the Cultural Revolution in 1976. This sounds shocking, but it is not unexpected given the economic and social carnage wrought by the coronavirus pandemic. It does not mean that the country’s economy is collapsing, although more signs of a pickup will be welcome now that China is emerging from the worst of a global public health catastrophe.
However, gross domestic product figures released by the National Bureau of Statistics reveal only part of the long road to recovery that lies ahead. What is untold is the devastation of global demand for its output that China is facing as a result of other countries shutting down their economies to try to contain the pandemic and halt its spread. Another is that medical experts cannot rule out a new wave of infection next autumn capable of derailing a fragile recovery as more people resume normal commercial activities.

Testament to the demand shock is the report this week by the International Monetary Fund that the world is facing the worst downturn since the Great Depression of the 1930s, with the fallout expected to be much worse than during the global financial crisis.

As a result, even if the economy is powered by a recovery over the second half of the year, it may regain only weak growth levels. To put that into perspective, the data from the statistics bureau also showed that over the single month of March, even as evidence mounted of a turnaround in the battle against the coronavirus, the economy remained under huge pressure.

For example, while industrial production held up better than expected in March, manufacturing contracted by 10.2 per cent, suggesting that even as factories reopen, headwinds are still severely buffeting the economy.

Retail sales, a key measurement of consumption fell by 15.8 per cent, on top of a record 20.5 per cent collapse in the first two months.

Evidence of the overseas demand shock that may lie in wait for China is to be found across its most lucrative markets. The scale of pandemic-related unemployment alone in the United States, with 22 million people having filed jobless benefit claims, points to an uphill slog to rebuild sales. Key euro zone economies such as Germany and France are already in recession, with the whole bloc set to experience a painful contraction.

All eyes will now be on China and the pace and depth of its recovery. Its economy has roared back from deep slumps before. But it was buoyed by stellar growth rates that are now a thing of the past. This journey to full recovery will be long and winding. The authorities cannot relax their vigilance against ambush by the coronavirus.

This article appeared in the South China Morning Post print edition as: China faces long road to recovery in wake of pandemic carnage
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