Coronavirus brought down the economy of China: other countries in the queue

The Chinese economy slipped sharply in the first quarter of 2020 — the first time in three decades, the calculation of quarterly indicators, as the epidemic of the coronavirus paralyzed trade and investment, reports the BBC Russian service.

Коронавирус обрушил экономику Китая: другие страны на очереди

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China’s GDP in January-March fell by 6.8% in annual terms, after rising 6% in the previous quarter, according to the National Bureau of statistics. For comparison, over the past 50 years, the average annual growth of China’s GDP was 15%. In quarterly terms, the Chinese economy fell by 9.8% after rising 1.5% in October-December 2019. However, retail sales in the country fell in March by 15.8% compared to the same month of the previous year.

China didn’t like that since the devastation of the “cultural revolution” of Mao Zedong the late 1970-ies and the current crisis in the country will affect each inhabitant of the planet.

The virus came to China quite out of place. The economy was weakened: in the past year, it grew by only 6.1%, which had not happened since the end of last century. In addition to internal structural reasons associated with the transition to a more Mature growth model based more on consumption than on production, economic activity has undermined trade war with the United States and protests in Hong Kong.

But even in this situation, the capital of China is not leaked, but rather due to the flow not associated with the virus of financial liberalization. But even with the influx of foreign money, China’s economy still suffers. But most countries in the world less fortunate — money flow away from them at a record pace.

What will happen to other countries

China now has 17% of the world economy, so the crisis there will affect the entire planet. The slowdown in China promises problems of the rich developed countries and poor developing does face a disaster. They mostly depend on the inflow of foreign capital, and it is the time of the epidemic runs away from them faster than in the last crisis of 2008-2009. The withdrawal of foreign money is going to these countries devaluation, falling standards of living, increasing costs of servicing old debts and difficulties with attracting new. And this in a situation when the Treasury so empty because the expenses increased due to emergency spending on combating the epidemic, and the income declined as businesses and people get poorer, and the export the goods like raw materials or components that are cheaper.

World Finance officers Association Institute of International Finance (IFF) has estimated that since mid-January, when they began to emerge of the scale of the epidemic in China, the outflow of money from emerging markets amounted to $ 100 billion and far exceeded the withdrawal of capital, even at the peak of the financial crisis a decade ago. And he is accelerating: in March leaked more than 80 of these 100 billion.

A real indicator of a slowdown in China could be worse

Falling prices for oil and metals, which excites most countries, China is just at hand: it is the world’s largest importer of natural resources. In addition, the data of the first quarter do not fully take into account the second shock to the Chinese economy is external. After the recession of production and consumption within the country “world factory” faced with falling demand for its products in developed countries.

China produces almost half of components for end products in the developed countries. If the demand for iPhones and cars in the West is declining, suppliers in China are ruined, and its economy is slowing down. However, this shock will only be reflected in second quarter results for April-June. We learn about them in the middle of summer.

Coronavirus marked the beginning of a new era. This year the Chinese economy will grow at a measly (for the performance of China) 2.5 per cent, analysts say. Even in 1990, after the bloody suppression of protests in Tiananmen square in Beijing China’s GDP increased by almost 4%.

As previously wrote ForumDaily:

  • Coronavirus leads the world into the worst crisis in 100 years: forecast of the chief economist of the IMF
  • The recession is not always bad: three positive aspects of the economic crisis
  • Regardless, have you lost your job or encountered other financial difficulties, there are several ways to improve the situation during the crisis
  • American diplomats told how coronavirus crisis can help to end the war in Ukraine

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