Six per cent contraction in Q1 of 2020 . . .
The first consolidated data since the COVID-19 outbreak shows that China's economy contracted by six per cent in the first two months of 2020 alone – the steepest drop in 50 years, with a continuing fall expected. In spite of government efforts to encourage companies and manufacturers to go back to work, domestic consumption is still very low as people remain wary of going back to restaurants and shopping malls. In the first two months of 2020, Chinese exports dropped 17.2 per cent – even before global demand dropped drastically due to wider pandemic, which could almost bring exports to a halt.
Experimenting with new measures . . .
China was the first country to test macroeconomic measures to revamp its economy. Interest rates, taxes, and fees have been cut as well. Liquidity injections followed, but just enough to boost consumption. Other specific policy measures have sought to maintain employment across all sectors of the economy, like increasing state demand of supplies. However, all these efforts have diminished China's international reserves, which lost C$12.67 billion in the last two months. Trade surplus is lost, and China's debt-to-GDP ratio is expected to rise from 50.5 per cent to 62 per cent by the end of the first semester.
The light at the end of the tunnel . . .
One silver lining is that as the first country to experience the pandemic, China seems to have moved past the worst of the COVID-19 outbreak, with lessons learned. China is now slowly transitioning from social distancing back to normalcy, and the manufacturing sector has re-aligned its priorities to produce medical supplies such as masks and COVID-19 test kits for the international market. Beijing has sent medical supplies and personnel to Europe. Canada is in the beginning stages of its COVID-19 outbreak, and there could be insights to take away from China's earlier experiences to minimize the blow to the Canadian economy and society.