Is China heading for a secret recession?

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

Chinese coal consumption is more than a third lower than normal © Getty Images

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.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

“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

Advertisement

Recommended

Visit/economy/asian-economy/chinas-economy/601018/chinas-economy-to-shrink-for-the-first-time
China's economy

China’s economy to shrink for the first time since 1976

China may now be on course for its first quarterly contraction since 1976, with Goldman Sachs predicting a 9% plunge in first-quarter economic activit…
20 Mar 2020
Visit/economy/asian-economy/chinas-economy/600819/has-hong-kong-become-a-failed-state
China's economy

Has Hong Kong become a failed state?

Hong Kong cannot protect its citizens, provide basic services or command the trust of its people, and it is failing to provide the safety and stabilit…
14 Feb 2020
Visit/economy/asian-economy/china&
China's economy

Investors eye up a new round of Chinese stimulus

Chinese policymakers have announced new stimulus measures to contain the fallout from the coronavirus. Asset managers are already positioning themselv…
6 Feb 2020
Visit/investments/stockmarkets/china-stockmarkets/600783/chinas-feverish-stockmarket-weighs-the-cost-of
China stockmarkets

China's feverish stockmarket weighs the cost of the coronavirus

China’s stockmarket fell by 8% in one day – the biggest daily fall in more than four years. But investors shouldn't panic.
6 Feb 2020

Most Popular

Visit/investments/property/601065/what-does-the-coronavirus-crisis-mean-for-uk-house-prices
Property

What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020
Visit/economy/uk-economy/601063/the-uks-bailout-of-the-self-employed-comes-with-a-hidden-catch
UK Economy

The UK’s bailout of the self employed comes with a hidden catch

The chancellor’s £6.5bn bailout of the self employed is welcome. But it has hidden benefits for the taxman, says Merryn Somerset Webb.
27 Mar 2020
Visit/investments/commodities/gold/601037/gold-is-on-a-wild-ride-so-should-you-be-buying
Gold

Gold is hard to find right now – so should you be buying?

With demand through the roof and the physical metal hard to find, it's not the best time to buy gold. But right now, says Dominic Frisby, you want to …
25 Mar 2020
Visit/investments/stocks-and-shares/share-tips/601035/share-tips-of-the-week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
27 Mar 2020