That the Chinese economy contracted by 6.8 per cent year-on-year in the first quarter should not come as a surprise. Yet the job market and food supply chains remain largely stable despite the economy being battered, which is a potent sign that the economy can regain its normal growth momentum after production and retail operations resume now that China has largely contained the spread of the novel coronavirus.
Economic activities almost came to a standstill in the first two months when the country was forced to implement stringent measures, including locking down cities and restricting the movement of people and vehicles, to contain the coronavirus outbreak.
Reassuring, though, is the fact that both the unemployment rate and food prices were on the decline in March. Compared with 6.2 per cent in February, the surveyed urban unemployment rate in March was 5.9 per cent. And the consumer price index rose by 4.3 per cent in March, against 5.2 per cent in the previous month.
What is specially encouraging is that economic activities rebounded at a fast pace in March, with a series of indicators, including industrial output, retail and services, improving remarkably.
Considering that economic activities started resuming gradually only after mid-March, it wouldn’t be over-ambitious to expect an even stronger and more sustained recovery in the coming months as the repressed demand is unleashed.
The economic contraction in the first quarter, in the final analysis, may prove to be only a one-off shock. Uncertainties remain, though. The spread of the pandemic and rising death tolls in other countries since March have reduced, and will continue to reduce, global demand, and therefore affect China’s exports.
But the Chinese economy may well have passed its worst.
In the next stage, the authorities, on the back of a series of policy initiatives, could continue rolling out supportive policies, mainly fiscal, to ensure the corporate sector can cope with the difficulties and the job market remains stable.
By opting not to adopt a massive monetary stimulus to boost the economy, China has avoided significantly raising the debt levels, which could be a more sustainable way of regulating the economy.
As China’s National Bureau of Statistics spokesman Mao Shengyong said, although the outbreak seriously disrupted economic activities in the first quarter, it did not destroy China’s production system and capacity.
And considering the huge size of China’s market, its massive growth potential, high-quality labor force, sound infrastructure, and perpetual opening-up policy, there is reason to believe the economy will emerge stronger from the contraction in the first quarter.
China Daily/Asia News Network