China’s economy has reduced in size for the first time in decades

China’s unbelievable economic growth streak of over forty years has finally come to an end today, with the world’s second largest economy recording a negative growth rate of -6.8% in the first quarter of 2020.

In the last three months, the deadly outbreak of the coronavirus has crippled the Chinese economy, forcing factories, businesses, and schools to close across the country, effectively putting over 1.3 billion people into lockdown.

The economic ramifications of shutting down an economy for three months are huge, and go far beyond just a short-term decline in demand. Thousands of businesses have gone bankrupt and millions of workers find themselves unemployed with no income to support their daily life.

In addition to the growth figures, the National Bureau of Statistics (NBS) in China has also announced a year-on-year reduction in manufacturing production of -10.2% for March and a -15.2% decrease in retail sales. Whilst a reduction was always expected, Chinese policy makers did not expect it to be so large after lockdown restrictions began to relax in early March with many industrial operations firing up again.

Investment across the first quarter of 2020 has also been hit hard, a decline of -16.1% quoted by the NBS.

Whilst these growth figures for China give the world an indication of how damaging the spread of Covid-19 has been, the true extent of this damage on the global economy will not be known until the crisis is over and a recovery can begin. With billions of people still under lockdown around the world, and coronavirus cases still increasing in both developed and developing economies, the end is unfortunately not in sight, and in this highly globalised world, the economic fallout will be felt by everyone.