Is China heading for a secret recession?

The shutdown sparked by the coronavirus outbreak could put China at risk of a “secret recession”.

Could the Covid-19 shutdown have put China on course for a “secret recession”? asks Tom Rees in The Daily Telegraph. Freya Beamish of Pantheon Macroeconomics predicts an “unprecedented” 0.9% quarter-on-quarter GDP fall. GDP expanded by 6.1% last year, but there are persistent questions about the official figures. The true impact of this outbreak will “be a closely guarded state secret”. 

“It is hard enough to understand China’s economy and its global ramifications at the best of times,” says Ambrose Evans-Pritchard in The Daily Telegraph. Those banking on a stimulus-led rebound later this year must first wait for the outbreak to be contained. Meaningful fiscal stimulus is impossible so long as the spending channels are blocked by health curfews and factory closures.

“It is hard to overstate” the economic impact of the current shutdown, says The Economist. Chinese coal consumption is more than a third lower than normal; factories are shut or running at low capacity in provinces accounting for more than 90% of exports. The global economic impact could be severe. Unlike during the 2003 Sars outbreak, China’s factories are today enmeshed “in supply chains of mind-boggling complexity”. The closure of a factory in Wuhan could have consequences for a manufacturer in Stuttgart and a retailer in Michigan. 

Evidence of an impact on neighbours has already emerged, says Neil Shearing of Capital Economics. Korean imports from China fell almost 50% year-on-year in the first ten days of this month. The coronavirus will prompt more multi-national businesses to question the wisdom of complex supply chains. We are already living in an era of deglobalisation in the wake of Trump’s trade wars. The Covid-19 outbreak will only accelerate the tre

Recommended

Best savings accounts – January 2023
Savings

Best savings accounts – January 2023

Interest rates on cash savings are making a comeback. We look at the best savings accounts on the market now
27 Jan 2023
The High Income Child Benefit Charge - is it the most illogical, unfair and unnecessary tax?
Personal finance

The High Income Child Benefit Charge - is it the most illogical, unfair and unnecessary tax?

We may not like taxes, but this one is blatantly unfair, penalises middle income earners and adds to the gender pensions gap, says Kalpana Fitzpatrick…
27 Jan 2023
Share tips of the week - 27 January 2023
Investments

Share tips of the week - 27 January 2023

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages
27 Jan 2023
Rents across the UK rise to record highs
Personal finance

Rents across the UK rise to record highs

Rightmove’s latest rental trends tracker shows tenants are facing record price increases
27 Jan 2023

Most Popular

House prices could fall 30%. Should investors be worried about a repeat of 2008?
Investments

House prices could fall 30%. Should investors be worried about a repeat of 2008?

Some analysts are predicting that house prices could fall as much as 30%, which, when compared to the fact that prices have jumped 28% since April 201…
24 Jan 2023
State pension age could rise to 68 as early as 2035 – what it means for you
State pensions

State pension age could rise to 68 as early as 2035 – what it means for you

State pension age increases could be accelerated, with the change to 68 coming in as early as 2035, affecting those who are 54 and under today.
25 Jan 2023
When will interest rates go up?
UK Economy

When will interest rates go up?

New interest rates will be announced on 2 February – we look at what to expect.
26 Jan 2023