17 April 2020

China's Economy Contracts

BEIJING — The coronavirus outbreak has brought China’s extraordinary, nearly half-century-long run of growth to an end — a stark reminder of the enormous task ahead for world leaders trying to restart the global economy. 
Chinese officials on Friday said that the world’s second-largest economy shrank 6.8 percent in the first three months of the year compared with a year ago, ending a streak of untrammeled growth that survived the Tiananmen Square crackdown, the SARS epidemic and even the global financial crisis. The data reflects China’s drastic efforts to stamp out the coronavirus, which included shutting down most factories and offices in January and February as the outbreak sickened tens of thousands of people.
From here.

First of all, I note that on September 27, 2012, I predicted that "China's Great Depression Will Start Post-2014 And Pre-2024." I have stood by that prediction continuously since then. It looks like 2020 has turned out to be the year, although whether this will be a "Great Depression" or merely a serious recession, remains to be seen.

Second, the United States has clearly been more hard hit by COVID-19 than China by almost any measure, including deaths per million people (108.5 v. 3.3), diagnosed cases per million people (2095.4 v. 59.4), with the U.S. rates growing steadily. The death rate per diagnosed case in the U.S. is currently similar to that of China (5.18% v. 5.60%) but is rising rapidly in the U.S. (it exceeds 7% in Michigan and bellwether New York State), while holding steady in China. So, the U.S. will almost surely suffer significantly more than a 6.8% decline in its GDP over a three month period, shifted forward two or three months because the coronavirus hit the U.S. later than it did China.

Economists at the Fed are predicting a 7% GDP contraction in the U.S. for the first quarter of 2020 (roughly the same as China's) but that includes less than a full month of full force coronavirus impact that China was in the full throes of battling for the entire quarter.

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