Coronavirus: China’s Xi Jinping promises action as economic growth machine stalls in first quarter of 2020

Contraction of 6.8 per cent in the first quarter of 2020 ends China’s long unbroken official run of economic growth

Politburo meeting chaired by President Xi Jinping vowed to support the economy, amid biggest crisis in decades

4-MIN READ4-MIN

Even as the surveyed jobless rate – the official measurement of unemployment in China – fell to 5.9 per cent from the record 6.2 per cent in January and February, many economists believe real job losses are more rife. Photo: AP

Published: 8:56pm, 17 Apr 2020Updated: 12:16pm, 20 Apr 2020

Chinese President Xi Jinping promised the government would take more aggressive steps to support growth after the economy shrank by 6.8 per cent in the first quarter.

A politburo meeting chaired by Xi on Friday concluded that China would be more aggressive in its economic policies to counter the impact of the coronavirus, after the first contraction since quarterly records began in 1992.

The last official contraction in 1976 had been for the full year, and came as China was coming out of the Cultural Revolution.

In a statement, the decision-making body said it would prioritise boosting domestic demand, encouraging consumer spending and increasing public spending. The 25-member committee said China will raise its fiscal deficit ratio and issue special government bonds. It also urged the central bank to use tools, including interest rate cuts, to support growth.

“We should look at the economic situation in the first quarter with a normal heart, we cannot simply compare the economy this year with the previous ordinary years,” said Mao Shengyong, spokesman for the National Bureau of Statistics, alluding to the extraordinary challenges of the year so far.

The 6.8 per cent shrinkage in China’s economy was deeper than many expected, although economists were divided on how deep the contraction would be, and how honestly it would be reported.

The figures also showed that in March, as China’s lockdown was easing, severe headwinds remained. Retail sales, a key part of consumer spending, had not recovered nearly as much as was hoped, falling by 15.8 per cent last month after an all-time low of minus 20.5 per cent in combined data for January and February.