Coronavirus collapse in the Chinese economy and why it is a great threat to the world


The impact that the coronavirus crisis will have on the Chinese economy remains to be seen, but the figures that are being published paint a grim picture. According to experts, the data reveals the scale of the damage caused by the new SARS-CoV-2 coronavirus and will increase fears of a global recession.
Coronavirus collapse in the Chinese economy and why it is a great threat to the world
China released economic data this week that paints a complex economic picture caused by Coronavirus.

The impact that the coronavirus crisis will have on the Chinese economy remains to be seen, but the figures that are being published paint a grim picture.

China's National Bureau of Statistics reported record declines in industrial production, retail, or investment in fixed assets, which, added to other indices, anticipate a collapse across multiple domains.
According to experts, the data reveals the scale of the damage caused by the new SARS-CoV-2 coronavirus and will increase fears of a global recession.
The figures were released on the same day that the number of deaths related to covid-19 - the disease that causes the virus - outside China exceeded those recorded in the Asian country.
It also coincided with the drastic cut in interest rates approved by the United States Federal Reserve (Fed), as the stock markets continue to free fall around the world.
End of recommendations.
The epicenter of the coronavirus outbreak has moved to Europe, with Italy and Spain as the two most affected countries, with about 36,000 cases in total and almost 3,000 deaths, according to data on March 16.

Record falls

In the first two months of 2020, three economic indicators recorded double-digit declines, with historical records, as reported by the National Statistics Office on Monday.
Industrial production (which measures manufacturing, mining and utilities activity) fell 13.5% year-to-year, the first contraction since January 1990.
Retail sales, a key indicator of the state of consumption in the second world economy, fell by 20.5% year-to-year, the biggest collapse since records are available.
While investment in fixed assets - which reflects expenses on items that include infrastructure, property, machinery and equipment - fell by 24.5% year-by-year, another record decline.
These data, in addition, add to the bad figures of the manufacturing industry in February, which was at its lowest level since 2005, as it was released earlier this month.
The drop is mostly a result of measures taken by China to contain the spread of the virus in the territory, including the closure of factories or stores across the country for weeks after the lunar New Year holiday, which is already in itself is a strong break.

The full impact of the pandemic on China and the world remains to be seen.

The full impact of the pandemic in China and the world remains to be seen.
The full impact of the pandemic in China and the world remains to be seen
Despite the fact that the second world economy is gradually returning to the march, the situation has not yet returned to normal .
According to the National Business Index of the research firm Trivium, until March 16 the Chinese economy was operating at 69.5% of normal production.
"The restrictions on industrial activity have been mostly solved. The great concern now for companies is low demand," said the firm.
And it is that from the beginning of this crisis one thing has been clear to economists: that covid-19 affects both sides of the economy, both the supply chain and demand.
The supply of goods and services is affected because factories and offices close and as a result, production falls. And at the same time, demand also does so because consumers stay at home and stop spending.

"Checked"

Despite the bad data, Chinese authorities insisted that the consequences of the epidemic are "short-term and controllable," announcing that they will take stimulus measures to cushion the blow, according to the statement from the National Statistics Office.
Official media cited experts who are optimistic about the economic recovery in the coming months, including Liang Huang, chief economist at the China International Capital Corporation.
President Xi Jinping said he had won the battle against the virus in Wuhan City, the epicenter of the outbreak, and Hubei, the province to which he belongs.
President Xi Jinping said he had won the battle against the virus in Wuhan City, the epicenter of the outbreak, and Hubei, the province to which he belongs.
President Xi Jinping said he had won the battle against the virus in Wuhan City, the epicenter of the outbreak, and Hubei, the province to which he belongs.
Liang told the official nationalist Global Times, that "if the situation continues without complications, China is capable of achieving annual GDP growth of 6%."
China grew at its lowest rate in three decades in 2019 (6.1%) and the government has insisted that, despite the epidemic, its economic and social development goals can be met this year.
The Executive usually disseminates those goals -such as GDP or inflation- in March, during the annual session of the National Popular Assembly (Legislative), but that crucial appointment has been postponed due to the outbreak until a date yet to be determined.
The forecasts, however, are radically opposed in the eyes of independent economists.

The full impact of the pandemic in China and the world remains to be seen.

According to analyst Julian Evans Pritchard, from the British consultancy firm Capital Economics, the contraction in industrial and service production suggested "that average GDP growth was -13% in the first two months of the year"
"It would be unprecedented in China's modern economic history: the last contraction of GDP in year-on-year terms was in 1976. "
Despite the government's efforts to redirect the country towards a model more based on domestic demand, the second world economy continues to have a strong dependence on foreign demand, so the situation in other countries affects it greatly.
"While conditions nationwide should gradually improve over the coming months," Evans-Pritchard warned, "the increasing global disruption from the coronavirus will slow the pace of recovery ."
Estimates from different agencies have been adjusted as the virus progressed and the latest forecasts by banks such as ING put Chinese GDP growth for 2020 at 4.8%, which would be the biggest drop in three decades.
And, in a hyperconnected world, in which China has a great weight today - it represents a third of manufacturing worldwide and is the largest exporter of goods in the world - what happens in the Asian country will have a global impact.

Global impact of Coronavirus Covid-19

The virus, according to the Organization for Economic Cooperation and Development (OECD), represents the "biggest threat to the global economy since the 2008 financial crisis" and estimates that it could grow at its lowest rate since 2009 due to the outbreak.
Earlier this month, the United Nations Conference on Trade and Development (UNCTAD) predicted that the coronavirus could cost the global economy as much as $ 2 trillion this year.
Globalization causes economic estimates of the impact of the pandemic to vary as more countries adopt new and different measures to contain the virus, greatly affecting the world economy.
The closings in Spain and Italy are an example of the drastic actions that some governments have taken to try to curb infections.

Economists interviewed agree that we are "very close to a global recession".

Economists interviewed by BBC agree that we are "very close to a global recession".
Economists interviewed by BBC agree that we are "very close to a global recession".caption
On the supply side, the drop in activity in the so-called "world factory" has already caused consequences: the restrictions have affected the value chains of large companies such as the vehicle manufacturer Nissan or Jaguar or Land Rover, for example.
The latter noted that he had had to move auto parts in suitcases because some factories had run out of supplies. On the demand side, sectors such as tourism are being tremendously affected after restrictions on the transport of people and the cancellation of major events.
Consulting firm McKinsey calculates, with data as of March 16, that global GDP could "slide or shrink considerably" in 2020 depending on the decisions made.
McKinsey differentiates between two scenarios: one in which there is a rapid recovery, in which the virus is found to be seasonal and by autumn governments have the tools to stop it; or a global slowdown, in which viruses are not seasonal and countries must maintain contagion prevention measures even if they controlled the epidemic, as in the case of China.
In the case of Latin America, for example, the firm calculates that in the first scenario, growth estimates would fall by only 0.5%, while if the second situation were to occur, growth forecasts would be reduced by 38%.
Countries that depend on the sale of raw materials, as in the Latin American region, are in a delicate situation, warned UNCTAD.
"Heavily indebted developing countries, particularly commodity exporters, face an exceptional threat," due to a lower return on exports tied to a stronger dollar, warned Richard Kozul-Wright, director of the Strategies division of UNCTAD Globalization and Development.

Dollar rise in 2020 due to Coronavirus COVID-19


Coronavirus: Raising awareness of the economic impact of this crisis is one of the reasons that may have led China to publish its bad numbers this month, according to experts such as Alicia García Herrero, chief Asia-Pacific economist at NATIXIS.
Source: XTB
Raising awareness of the economic impact of this crisis is one of the reasons that may have led China to publish its bad numbers this month, according to experts such as Alicia García Herrero, chief Asia-Pacific economist at NATIXIS.
One important reason why China may have released such bad numbers, beyond helping [get] curve V: warn the world how badly the situation can get for them and push the Fed and others to react to the fading of global demand, "he noted on Twitter”.
"Let's call it 'threat coordination.'"


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