China’s Economy Shrinks For First Time Since 1992

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China's Economy Shrinks For First Time Since 1992

Due to the breakout of COVID-19,  a disease spread by the coronavirus, China’s economy has shrunk for the first time in decades in the first quarter of the year. China is now dependent on the fragile customer’s demand to have the recovery of its economy.

China which stands for the second-largest economic country, 6.8 per-cent shrinkage can be seen in its economy as per the data from officials released on Friday.

Yue Su at the Economist Intelligence Unit said that the contraction in GDP from January till March translates into permanent income losses, bankruptcies seen in small companies along with job losses.

Last year China had a heathy GDP though he was in a trade war with the US.

But the starting first three months of this year China faced shrinkage in its economy due to massive shutdowns and quarantines amidst the pandemic.

After reports were released the country’s leaders decided to provide more stimulus which includes cuts in interest rates for the boosting of domestic demand as reported by China Central Television on Friday evening. The report added that “reasonably ample” liquidity would be maintained by the authorities by cutting the amount reserves bank need to hold.

The output from the retailing and factories showed improvement in economic activities but the overall data suggested many struggles in regaining the economy.

China's Economy Shrinks For First Time Since 1992

Louis Kuijs, head of Asia economies at Oxford Economics Hong Kong Ltd. said that this economic recovery would continue though the upturn would be slowed down because of low demands from consumers and a decrease in foreign demands.

Retail sales slid down by 15.8 per-cent in March and 16.1 per-cent decreased in investment was seen.

The production capacity of China was gradually restored, but the problem is, the rest of the world is shut down thus diminishing the external demand.

Factories in Wuhan, are working around the clock, to regain the speed of recovery, which won’t be very easy.

People have started to move on the streets of Wuhan but they remain cautious which restrain demands and activities as said by Frederic Neumann, co-head of Asia economic research at HSBC Holdings Plc in Hong Kong.

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