China GDP: causes of decline and economic recovery
The coronavirus pandemic has shaken the world and shown how unprepared humanity is for large-scale disasters. The first country to be hit was China. Here, the disease developed rapidly, which forced the government to take strict measures: quarantine, closure of cities, stopping production and communications with other states. All this had a positive effect, but had an impact on the economy. In the first quarter of this year, China’s GDP fell by 7%, the first such decline in 30 years.
Since 1992, the Chinese economy has been growing steadily, so these figures were a real shock. Even the forecasts did not speak about such a strong subsidence, which was caused by the pandemic and quarantine. According to several sources, China’s GDP has declined for the first time since 1976, when the country experienced a cultural revolution.
In Q4 2019 the state economy grew by 6%, and only for 3 months of the current year there was a 7% decline. Industrial production in March dropped by 1.1% compared to the same period last year. Retail sales volumes in the same month decreased by almost 16%, and for the quarter – by 19%.
Investors were withdrawing money from the market in an urgent manner. As a result, investments were reduced by 16%. Unemployment rose, its level was almost 6%. The largest number of people who lost their jobs was observed in February – 6.2%.
China used strict measures to neutralize the coronavirus outbreak. People did not go beyond residential complexes, cities were closed. A huge number of industrial enterprises were shut down, people’s expenses were sharply reduced. And if at the beginning of the year the forecast of analysts said about the GDP falling by 6.5%, the reality was more severe – the values fell by 7%.
It must be understood that the fall of the Chinese economy is affecting many countries. This is primarily because China is the world’s largest market with multi-billion-dollar volumes of exports and imports. That is why the crisis phenomena here are felt in the United States, Russia, and the European Union.
Despite the serious shock that the country has experienced, the economy is gradually recovering. The Government has adopted a strategy aimed at supporting the population and businesses that have been affected by the pandemic. Production is increasing and the market for trading and purchasing raw materials is being cut off. However, demand does not yet allow us to say how fast China will increase its pace. The world is still recovering from shock and is cautious about increasing supplies and imports.
It is difficult to make a long-term forecast, but in China now all efforts are aimed at restoring the processes in trade and industry.