China’s economy in worst downturn since ’70s in virus battle

BEIJING (AP) — China suffered its worst economic contraction since at least the 1970s in the first quarter as it fought the coronavirus, and weak consumer spending and factory activity point to a longer, harder recovery than initially expected.

The world’s second-largest economy shrank 6.8% from a year ago in the three months ending in March after factories, shops and travel were closed to contain the infection, official data showed Friday.

That was stronger than some forecasts that called for a contraction of up to 16% but China’s worst performance since before market-style economic reforms started in 1979.

BEIJING (AP) — China suffered its worst economic contraction since at least the 1970s in the first quarter as it fought the coronavirus, and weak consumer spending and factory activity point to a longer, harder recovery than initially expected.

The world’s second-largest economy shrank 6.8% from a year ago in the three months ending in March after factories, shops and travel were closed to contain the infection, official data showed Friday.

That was stronger than some forecasts that called for a contraction of up to 16% but China’s worst performance since before market-style economic reforms started in 1979.

“The upturn will be slowed down by lingering consumption weakness and sliding foreign demand,” said Louis Kuijs of Oxford Economics in a report. He said it might be the fourth quarter before economic growth reaches a level of 4% over the previous year.

For the full year, forecasters including UBS, Nomura and Oxford Economics say China will have little to no growth.

The ruling party has yet to announce this year’s official growth target. It has been at least 6% in previous years. Beijing looks likely to miss its target of doubling incomes from 2010 levels by this year.

The operator of a still-shuttered fitness center in the western city of Xi’an said he doesn’t know whether the business will survive.

“The business may go bankrupt, and I would have to find something else to do,” said the owner, who would give only his surname, Liu.

Beijing is trying to prop up activity by spending more on building next-generation telecoms networks and other projects. But the ruling party doesn’t want to pump too much money into the economy for fear adding to debt or pushing up inflation that is near a seven-year high.

Chinese leaders probably will adopt stimulus measures at least as big as their response to the 2008 crisis but will emphasize “quality instead of quantity,” said Zhu at the Rushi Finance Institute.

He said money was likely to go to technology development and social welfare instead of construction, as it did in 2008.

Last year’s economic growth sank to a multi-decade low of 6.1% under pressure from weak consumer demand and a tariff war with President Donald Trump that depressed exports.

“The epidemic has amplified the problems, so the pace of recovery will be much slower,” said Zhu.