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China’s economy reports first contraction on record

China economy reports first contraction on record

The Chinese economy reported the first contraction on record during the first quarter this year, as the lockdowns and restrictions to contain the Covid-19 spread heavily affected both producers and consumers.

The gross domestic product (GDP) in the world’s second-biggest economy came in at -6.8 percent in the January-March period on annual basis, following an expansion of 6 percent in the last quarter of 2019. The reading came worse than median estimates of 6.2 percent contraction.

Having negative growth is deemed the first since the first quarter of 1992, which is the first time China o0fficially calculated the GDP figures.

The quarter-on-quarter reading showed a sharp 9.8 percent contraction, slightly lower than forecasts of 9.9 percent drop, compared to a growth of 1.5 percent in the final three months last year.

For 2020, the Chinese economy may now report a slowdown in growth to 2.5 percent, down from 6.1 percent in 2019.

Other reports showed that industrial output and retail sales slipped 1.1 percent and 15.8 percent respectively in the year ended March, while fixed asset investment plummeted 16.1 percent in the three months ended March.

However, urban jobless rate retreated to 5.9 percent in March from 6.2 percent in February.

On April 20, the People’s Bank of China may announce reduction in the loan prime rate (LPR) after cutting the one-year medium-term lending facility (MLF) loans to financial institutions to 2.95 percent, the lowest since September 2014.

Despite the gloomy GDP data, China’s CSI 300 index finished nearly 1 percent up at 3,839.49.

The onshore yuan was 0.02 percent down versus the U.S. dollar at 7.0777, while the offshore yuan traded 0.09 percent higher at 7.0777, as of 07:50 GMT.

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