Home Business News China’s economy shrinks for first time in decades due to coronavirus

China’s economy shrinks for first time in decades due to coronavirus

by LLB Editor
17th Apr 20 12:59 pm

China’s National Bureau of Statistics has released Chinese GDP data for Q1 2020 this morning. It shows that Chinese Q1 GDP is down -6.8% year on year. It is being recognised as the first year on year fall in over forty years.

The markets are already treating today’s GDP print as a backward-looking measure, with Asian equity markets holding on to gains on the day. Whilst real-word economic transactions between businesses and consumers might take longer to regain more normal levels of activity, financial markets are ultimately discounting machines.

Markets are not perfectly efficient, but they try to set a fair price for assets that incorporate the outlook for future economic activity with a discount for the many uncertainties that exist.

Brooks Macdonald said, “Just as we are seeing economic activity move into and out of an unprecedented period of forced contraction, so financial markets have also had to navigate a similar path.

“Investors are trying to determine whether the shape of the recovery is a relatively quick ‘V’ shaped rebound, or a more gradual ‘U’ shaped improvement. But there is an important difference between economies and stock markets however.

“While underlying economies might take longer to recoup lost activity, financial markets will continue to look beyond Covid-19 as they look for an investment road-map.

“The level of unprecedented ongoing monetary and fiscal policy accommodation is encouraging investors to look further out on their investment horizons. With policy support expected to outlast the virus, it means that the economic recovery upswing when it comes could be very pronounced indeed.”

Leave a Comment

You may also like


Sign up to our daily news alerts

[ms-form id=1]