China reports sharp economic decline in first months of 2020

People wearing face masks walk along a street, as the country is hit by an outbreak of the new coronavirus, in Beijing, China February 24, 2020. PHOTO: REUTERS

Newly released economic indicators show a dramatic decline in China’s economy amid the coronavirus outbreak.

Industrial production, a gauge of manufacturing, mining and utilities activity, dropped 13.5 per cent in January and February compared with the same period last year, according to data released on Monday.

This was the first decline on record, fuelling expectations that China’s economy would contract in the first quarter – for the first time since 1976.

The contraction comes as factories were shuttered for weeks starting in January while the government tried to curb the spread of the coronavirus. Factories have gradually started to reopen in various provinces across China, but few have resumed working at full capacity.

Meanwhile, China’s retail sales collapsed, dropping by 20.5 per cent in the first two months of the year, according to the National Bureau of Statistics.

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Fixed-asset investment, which measures expenditure on things like infrastructure and property, plummeted 24.5 per cent, well below analysts’ expectations of a 2 per cent dip.

It was the first drop in fixed-asset investment since records began, in February 1998.

Hong Kong’s de facto central bank cut interest rates to a near-record low on Monday after the US Federal Reserve lowered its key rate in response to the economic threat posed by the coronavirus.

The Hong Kong Monetary Authority (HKMA) said it would immediately cut its base rate by 64 basis points to 0.86 per cent on Monday.

It was the second time the HKMA has reduced borrowing costs this month, as it tries to shore up an economy battered by months of anti-government protests and the coronavirus epidemic.

The city is mired in recession, with the hospitality, retail and tourism sectors hit hardest. Unemployment is at a nine-year high as restaurants are forced to close their doors or lay off staff.

Last month, Hong Kong chief executive Carrie Lam rolled out a virus relief package worth 25 billion Hong Kong dollars (3.22 billion dollars) to aid the economy.

(DPA)

Paul Omorogbe