For several weeks, large parts of public life and the economy ground to a standstill as a result of the Covd-19 pandemic. This has hit China hard: gross domestic product fell by 6.8 percent in the first quarter of 2020 compared with the same period last year. The figure is historic – there has been no recorded fall in GDP in the People's Republic since the Cultural Revolution of 1976. Over the past few weeks, the tough restrictions have been relaxed, and trade and production are picking up again. Yet despite tentative signs of economic recovery in March, major challenges remain for China’s government.
In the latest issue of MERICS Economic Indicators, economics experts Max J. Zenglein and Maximilian Kärnfelt analyze developments in various sectors for the first quarter, based on recently published statistics.
Their conclusion is that the shutdown has had an impact on the economy that is unprecedented compared to previous crises. Existing risks will be exacerbated, for example by the high levels of debt in the state and corporate sectors. Exports have fallen as a result of measure to stop the pandemic; whether they will recover will also depend on global demand. A global recession triggered by the Covid-19 crisis will also hit China hard; the government and citizens will have to prepare for corporate insolvencies and higher unemployment. China will remain in crisis mode for some time to come, and the growth target of around six percent – Beijing’s aim for many years now – will not be achievable again for some time
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