As the COVID-19 pandemic continues to spread, Chinese authorities’ draconian containment measures have brought the coronavirus’ domestic spread largely under control. As a result, policymakers around China are shifting their attention to shoring up the economy just as external headwinds start to ripple through. Most of the economic shock from COVID-19 will be concentrated in Q1 and gradually dissipate in the following quarters, though expect bifurcation in the economy as domestic demand improves amid sluggish exports. Overall, we project a V-shape recovery for China.
Despite a gradual pickup in domestic demand and resumption of factory activities, consumer demand remains lackluster, and an expected decline in export orders will put further pressure on China’s economy. During the first two months of 2020, China’s industrial production contracted by 13.5% YOY, retail sales fell 20.5% YOY, and fixed asset investment dropped by 24.5% YOY. These numbers, on the back of slow production normalization in the industrial sector, point to a bleak economic outlook for the whole quarter. Despite the potential upside for the economy during H2 amid an expected global recovery, we have revised down our annual GDP forecast to 2.6% YOY. Chinese authorities are likely to ramp up additional fiscal stimulus in the coming weeks to support growth and employment.
DuckerFrontier’s market experts are constantly monitoring the Chinese economy and key developments that could impact your business in the coming months. Below are three major developments for executives to watch:
Stay tuned for Part 2 of this series doing a deep dive with DuckerFrontier’s industry expert in Shanghai on specific industry implications.
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