• China 1Q20 GDP growth contracted 6.8% yoy

• Factories were the least affected as industrial production improved in March

• Retail sales were the most hit

• Investment was up in March but cannot be described as a recovery

• Uncertainty remains

China suffered its worst economic contraction since at least the 1970s in the first quarter as it fought the coronavirus, and weak consumer spending and factory activity point to a longer, harder recovery than initially expected. The world’s second-largest economy shrank 6.8% yoy in 1Q20 after factories, shops and travel were closed to contain the infection. That was China’s the worst hit since the disastrous Cultural Revolution in 1976. China's gross domestic product stood at CNY20.65tn (USD2.91tn) in the first quarter of 2020 amid the Covid-19 impact.

On a slowdown mode, China's economy grew by 6.1% yoy in 2019, the lowest annual growth rate in 29 years amid the bruising trade war with the US but it remained above the psychologically important mark of 6.0%. The GDP in 2019 expanded to USD14.38tn from USD13.1tn in 2018.

But the coronavirus which devastated China and the world ever since it broke out in Wuhan in December last year has dealt a major blow to the Chinese economy which was already in slowdown mode in the last few years due to steady shrinking of its exports markets. While China had shut down the 56 million-strong central Hubei province and its capital Wuhan for over two months since January 23 to contain the virus for over two months, the entire country came to a standstill to prevent the Covid-19 from spreading. The Chinese economy is now limping back to normal with factories resuming production all over.

A breakdown of the data showed output of the service sector, which accounted for nearly 60% of the total GDP, dropped by 5.2%, while primary industry and the secondary industry saw a decline of 3.2% and 9.6% respectively.

On a quarter-on-quarter basis, the GDP contracted 9.8% in 1Q20, compared to a 1.5% growth in the previous period.

Source: BIMB Securities Research - 20 Apr 2020