Back in action: China's industry has grown for the first time since the beginning of the year

In April 2020, industrial production in China grew by 3.9% compared to the same period in 2019. This was announced on Friday, May 15, by the State Statistical Office of the country. It is noteworthy that the growth rate was recorded for the first time since the beginning of the year.

In many respects, the positive dynamics of Chinese industry is associated with an improvement in the epidemiological situation in the country and the removal of quarantine restrictions. This was in a conversation with RT said the chief analyst of TeleTrade Mark Goichmann.

“April indicators can be considered unexpected in a good way. Industry, together with construction, accounts for approximately 47% of China's GDP. Production is the flagship of the economy, and its development stimulates the overall growth of the economy. This is also important in a broader sense, since China, as the “workshop of the world," largely affects the global demand for resources and goods, ”the expert added.

Note that from January to February, due to the effects of coronavirus, the industrial production of the Asian republic collapsed immediately by 13.5%. The fall occurred for the first time in 30 years. In March, as the spread of infection in the country slowed down, the industrial decline slowed significantly. The corresponding indicator decreased by only 1.1% compared to the same period last year.

Recall that the COVID-19 flash was first recorded in the Chinese city of Wuhan at the end of December 2019. As a result of the rapid spread of infection in the country, strict quarantine measures were introduced: a ban on mass events, suspension of enterprises, as well as restrictions on the free movement of citizens.

In the first three months of 2020, China's GDP fell by almost 7% in annual terms. The economic downturn was recorded for the first time since the beginning of official statistics - since 1992. Meanwhile, according to experts interviewed by RT, the last time the Chinese economy showed negative dynamics back in 1976.

Meanwhile, at the end of March, the PRC State Committee on Health Issues announced the end of the epidemic in the country. After that, the authorities began to gradually soften the quarantine regime, and enterprises began to restore work.

“The first to return were manufacturers of high-tech equipment. The demands of business and households have changed - many needed to improve the quality of the Internet, so it was necessary to create the appropriate infrastructure, ”EXANTE managing partner Alexei Kiriyenko told RT.

On April 17, Mao Shenyong, the official representative of the State Statistical Office of the PRC, announced the full resumption of the work of all the country's large enterprises. In turn, small and medium-sized businesses regained their activity by 80%.

Matter of technology

According to Mark Goihman, the relatively rapid restoration of Chinese production in April was due to stimulating measures by the government. First of all, we are talking about the payment of monetary compensation to enterprises and tax breaks for business. Against this background, the output of high-tech products immediately increased by 10.5%.

“China has managed to prevent a sharp drop in investment in the IT sector. If the total volume of investments in production decreased in April by 10.3% compared to the same period last year, then investments in high-tech industries decreased by only 3%. And, for example, investments in the production of computers and office equipment, on the contrary, increased by 15.4%, ”said Goikhman.

In addition to computer equipment, in April, the output of industrial equipment increased relatively quickly (by 9.3%). According to Alexei Kiriyenko, the reason for the observed dynamics was the growth in demand for industrial robotics.

“The trend towards a reduction in the labor force has been before, but promises to radically accelerate in the near future. If earlier factories tried to save on labor, then in a pandemic, employees become a weak link in large production sites, ”the expert explained.

Trading Reboot

Another factor in the restoration of Chinese industry, the interviewed experts called an increase in the volume of supplies of goods to the foreign market. So, in April, exports from China grew by 8.2% compared to last year.

“The increase in export volumes was facilitated by the fact that consumer countries of Chinese products in April also gradually weakened quarantine measures and returned to business activity,” said Mark Goikhman. 

In addition, Chinese companies carried out orders pending due to quarantine, which also had a positive effect on export volumes in April. About this RT said the director of the Academy of Finance and Investment Management Arseny Dadashev.

“Another area of ​​foreign trade that could grow under current conditions is the supply of medical equipment. In March-April, China sold about 130 million protective suits and 27.8 billion masks, ”said the expert.

In general, the Chinese economy is export-oriented, so in the future, business activity in the country will largely depend on the situation on world markets. This opinion is shared by Peter Mozias, Associate Professor, Faculty of World Economy and International Affairs, National Research University Higher School of Economics.

“If China does not overtake the second wave of coronovirus, then at the end of the year GDP growth can reach 3-4%,” the expert said in a conversation with RT.