A Chinese economist Zhang Anyuan with CFC Financial, a broker controlled by state-owned CITIC Securities, estimated that China’s first quarter growth will be 0% or worse, warning that previous prediction dismissing COVID-19’s mid- and long-term impacts on China’s economic growth is wishful thinking.
Zhang’s comments came after the country’s leader Xi Jinping said the country will still have to deliver this year’s economic and social targets when most economists and analysts have downgraded China’s growth to be around 4-5% for the year 2020.
Tough most were still expecting growth from Q1 to be around 3-5%, Zhang said the estimate was debatable if projected half a month ago, but given the current circumstances if still maintaining that estimate it would be “a miss as good as a mile”, he wrote in an article for China Chief Economist Forum, an economic research institute under China’s State Council.
Zhang warned the growth in Q1 will be even worse, as growth seems impossible when millions of people are locked at home for nearly a month.
Based on estimates by the New York Times, over 760 million in China are affected by the residential lockdown of various strictness since late January.
The Chinese economist hypothesizes if in January and March, the country managed to reach the growth target of 6%, and economy in February contracted by 12%, then for the three months combined, growth for Q1 will be 0%.
But based on percentage of business that have resumed work, power usage, passenger flow, container throughput and other indexes, February’s economy is far worse than the estimated drop of 12%, he says.
Over-estimating the growth for Q1, while expecting catch-up for ensuing months, as he says is misguided as well.
If there’s no growth for Q1, then for the following three quarters, growth must be over 7% to average out the annual growth rate to be around 5%. However, the last time China’s economic growth reached 7% was in 2017 for Q2 and Q3, he admits. A goal that he says is impossible as the country’s economic growth in 2018 and 2019 were already trending down.
For these suggesting a bright prospect for mid and long term growth target, he warns, if the suggestion is adopted into decision-making policy, the damages done by the pompous projection will be far more dangerous than under-estimating the coronavirus outbreak, he concludes.
While China is battling the deadly coronavirus, the fast-spreading virus has spread to 30 different countries and regions. Confirmed cases in South Korea, Italy and Iran spiked within days, adding fears of a global pandemic.
South Korea has now reported 763 cases with six deaths, mainly from hospital and a secretive church cluster. In Italy, the number grew to 152 with most cases found in northern Italy. The country locked down more than 50,000 people in 10 towns in the northern Lombardy region.