Capital Economics estimated that the latest data suggested China’s GDP had contracted 13 per cent during the first two months of the year, while Gavekal Dragonomics projected that GDP for the whole of the first quarter would contract between one and four per cent. Oxford Economics expected first quarter GDP to plunge 5 per cent.

Looking to a full-year horizon, it looks highly likely that annual GDP growth will be thelowest since 1978, when the late paramount leader Deng Xiaoping began China’s economic reform. Though it is too early to give a full assessment of China’s economic performance for the whole year, given the great uncertainties ahead, a weak first quarter will drag down growth for the full year.

Some economists are already saying that the 2020 annual growth will be lower than the previous record low of 3.9 per cent in 1990. That low point had come about in large part due to the economic sanctions imposed by US-led Western economies after Beijing’s military crackdown on the pro-democracy movement in Tiananmen Square the year before.

In a research note on Monday’s statistics, UBS said it would be a major achievement if Beijing could reach 3 per cent annual GDP growth this year, regardless of what stimulus measures Beijing took. Oxford Economics forecast full year growth of just 1 per cent.

What makes matters worse is that economic risks are mounting, even as the pandemic seems to be abating in China itself (if not the rest of the world).

The full scale of the shock may be worse than these early figures suggest because the lockdowns and other extraordinary restrictions China brought in to fight the virus took effect only from January 23.

Moreover, the resumption of work might be slower than official surveys suggest. Supposedly, as of mid-March, more than 90 per cent of state-owned enterprises and 60 per cent of small and medium-sized enterprises outside of Hubei province had resumed operation. But the surveys do not take into account what capacity these operations are working at.

In fact, other surveys suggest many migrant workers have not yet returned to work due to travelling restrictions and fears for their health.

And even long after the pandemic abates, business sectors such as hospitality, retail, transport, entertainment and tourism will continue to feel pain. Government restrictions, such as the suspension of major events, will continue and consumers will continue to exercise caution in avoiding crowds and social gatherings.

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For China, more than anywhere else, there is a sting in the tail of this pandemic. When the virus first hit, the supply side of China’s economy took a massive hit as things like factories were shut down. But now, just as China appears to be recovering from the worst of the health impacts, the spread of the virus to the rest of the world means the demand side of its economy will take a hit. Simply put, even if the factories open back up, they will have far fewer customers to buy their goods.

As if all the above was not enough, this unprecedented economic shock is coming at a time when policymakers have far less financial ammunition at their disposal due to the accumulation of debt over the past decade. China’s debt has reached a high of more than three times its GDP, a level that has caused problems for many economies in the past. And because this time the shock is on both the demand and supply sides, the government’s conventional approach of stimulating demand by relaxing credit and injecting liquidity into the economy might well not work.

As the novel coronavirus and the disease it causes, Covid-19, continue to spread across the world, hopes for avoiding a global recession look increasingly unrealistic. So too do hopes for a short-term V-shaped recovery for the Chinese economy. A U-shaped recovery might be possible, but even the worst-case L-shape model cannot be ruled out.

In short, even if an unprecedented recession can be avoided, the one thing certain about the year 2020 is that it will be the worst for the Chinese economy in living memory. ■

Cary Huang is a veteran China affairs columnist, having written on the topic since the early 1990s