As the country of origin of the pandemic, China was the first economy to fall into the Corona crisis. The Chinese economy experienced an unprecedented slump, as shown by the February figures from industry and retail, which were in double digits of minus. Since the beginning of March, the Chinese authorities have been relaxing the strict restrictions on public life and the economy is slowly beginning to recover. However, daily data on economic activity show that the road back to normality is very bumpy and will probably take a long time.
The stumbling blocks are not only the high security requirements to prevent a new wave of infection. The lockdown, which lasted for weeks, has deeply unsettled consumers. Shops and restaurants are still being avoided. In addition, the global economy is facing an ever deeper recession. Large parts of the Chinese export economy are facing a dramatic drop in demand. Fiscal policy has also been little affected so far. In contrast to previous crises, and also in contrast to many other economies around the world, the Chinese government has so far been conspicuously reluctant to implement economic stimulus programmes. The fiscal programs adopted to date only correspond to around 1.3 percent of economic output.
We have therefore lowered our growth forecast for China once again. At -10 percent (Q/Q) and -5.9 percent (Y/Y), China’s economic output in the first quarter is likely to have fallen even more sharply than previously estimated. For the rest of the year, too, we expect only a sluggish recovery. Gross domestic product (GDP) is therefore unlikely to more than stagnate in 2020 compared with the previous year. This has not happened since the turmoil of the Cultural Revolution in the 1970s. Pronounced basis effects should ensure high growth rates in the coming year. But this „yoyo effect“ is not a lively upswing.