China recently announced its 1Q20 gross domestic product (GDP) shrank by 6.8%, mainly dragged by the coronavirus pandemic. While the economic contraction is expected, this was a historic moment for China as the country recorded the biggest decline in decades. Last Friday, the Hong Kong’s Hang Seng Index (HSI) managed to close in the green, closing 1.6% at 24,380pts while the iShares China A50 Index ETF (China A50 ETF) also surged 1.0% to HKD13.70 despite China’s weak GDP.

China’s 1Q20 Key Figures

It was not a good start to the year as China posted its GDP declined by 6.8%, the worst decline for a single quarter since 1992. China’s National Bureau of Statistics (NBS) released economic data last Friday, showing major indicators declined across industrial production, retail sales, investments, and imports and exports. The sharp contraction fully reflects the weakness in consumer spending and investors confidence as the coronavirus weakens economies around the world.

Here are some of the key figures released last Friday:

• Industrial production dropped 8.4% in 1Q20 and marked a 1.1% decline in March.
• Fixed-asset investment fell 16.1% in 1Q20.
• Retail sales fell 19% in 1Q20. Sales of consumer goods fell 15.8% in March while online sales of physical goods rose 5.9%.
• Imports and exports down 6.4% in 1Q20

IMF forecasted China’s economy to rebound in 2021

Earlier last week, the International Monetary Fund (IMF) predicted that China’s economy will grow 1.2% in 2020 before jumping 9.2% next year, making it the best performer among major economies. IMF also projected that the global growth will likely fall by -3.0% in 2020, an outcome far worse than during the 2009 global financial crisis. Meanwhile, IMF predicted a partial rebounded in 2021 with the global economy growing at 5.8%.

IMF also added that there was “extreme uncertainty” and the situation could get worse. “The Great Lockdown”, as the IMF called the global downturn, is the worst since the 1930s Great Depression (The Star, 15 Apr).

Unemployment in China

According to the government’s survey, the unemployment rate in March was 5.9% (vs 6.2% in Feb). The spokesman of NBS said at a press conference last Friday, while the country’s employment is still stable overall, the pressure on jobs is still considerable due to canceled orders.

Source: Macquarie Research - 20 Apr 2020