New Corona China GDP's first negative economy V-shaped recovery difficult? April 24, 18:55

The spread of new coronavirus infections is rampant in the global economy.

In China, the GDP (Gross Domestic Product) for the first three quarters of the first quarter was down 6.8%.

The Chinese government is aiming for a V-shaped recovery in the economy by advocating "reconstruction and recovery (= industrial, industrial recovery)" as "basically suppressing the momentum of the spread of infection in Japan". While the spread of infection has not stopped, there are situations in which we may be forced to correct the trajectory. We will explore the actual situation of the Chinese economy. (Mr. Minoru Yoshida, Director General of China, Kazutoshi Ishii, Branch of Shanghai, Takeo Baba, Branch of Guangzhou)

First negative growth impact

On the 17th of this month, the National Bureau of Statistics of China announced the GDP for the first quarter of this year.

For the first time in the world, what is the impact on China's entire economy when a new coronavirus infection was confirmed?

The result was minus 6.8% year-on-year.

The growth rate fell by more than 12 points from the previous period, and fell for the first time since 1992 when quarterly statistics were published.

It is minus 9.8% when compared to the previous term, which is the same as the statistical methods used in Europe, the United States and Japan. If this continues for one year, the converted "annual rate" will exceed -30%.

So far, China has maintained positive growth despite many crises. When the "SARS" spread in 2003, the growth rate fell 9.1% even in the second quarter. In addition, after the Lehman shock in 2008, it dropped to 6.4% in the first quarter of 2009, and then achieved a V-shaped recovery through 2010.

Even before 1991, when there was no quarterly data, the negative growth rate for the full year was reversed until 1976.

This year was the last year of the Cultural Revolution, which brought about great disruption to China's society and economy. From that, you can see that this negative growth is unusual.

Is "reconstruction and recovery" possible? ?

“The new coronavirus had a big impact and the first-quarter index fell sharply,” said Yasuo Mamori, a spokesman for the National Bureau of Statistics, at the press conference.

It is very rare for a Chinese spokesman to admit to the depression at a press conference, but it may be a sign that the Chinese economy was badly damaged.

However, after that, bullish statements continued. The basis for this was the industrial production data for March, which was announced at the same time. Industrial production, which fell by minus 13.5% year-on-year in January-February, recovered sharply to minus 1.1% in March.

In response to this, Mr. Mao said, "The government's goal of" reconstruction and recovery "is progressing smoothly. The powerful measures of the government will make it even better from the second quarter onwards." I showed you.

However, when he visits the scenes in various parts of China, things that are different from Mr. Mao's bullish statement can be seen. The keywords for exploring it are "delay in recovery of consumer sentiment" and "thin foreign demand."

Shanghai where companies and people's activities have begun to resume

What is the actual situation of consumption after April?

First, let's explore Shanghai, the largest economic city in China.

People are returning to the tourist spots in Shanghai, and we can see couples taking photos for weddings. In addition, companies and stores that have been forced to take a long leave due to the spread of infection have resumed their activities.

On the other hand, in the service industry, there are many concerns about infections, and in many cases, severe management continues even after resumption.

The gym is open for thorough infection prevention

One of those companies. The largest sports gym in Shanghai resumed operations on March 2 for the first time in about a month. At that time, thorough infection prevention measures were taken.

We require users to perform a body temperature test at the entrance of the building and present a QR code that allows them to check for contact with infected persons.

Alcohol for disinfection was placed everywhere in the facility, and 15 new employees were hired to thoroughly disinfect equipment and elevators used for exercise.

In addition, in the gym with windows open for ventilation, about 40 trainers all wear masks.

In the class where people move their body in time with music, the number of participants has been reduced to half so that the participants can be separated from each other.

Why are you so thorough? One reason is that if you get infected from the gym, you risk running out of business again.

And another reason is the consumer sentiment that doesn't return after April.

Due to the health boom in recent years, the gym has grown rapidly with the number of members increasing by 20% every year.
However, the number of members after the resumption is said to have decreased by 20%. The Chinese government emphasizes the results, saying that "the spread of infection in the country was basically suppressed", but the confidence in the government's announcement was weak, and cases where infection was confirmed by people returning from Europe and the United States continued. Instead, the sense of vigilance remains among the average consumer.

It can be said that the consumer sentiment that does not return easily is the aftereffect of the new coronavirus, which has been rampant throughout China.

A new business model

How to stimulate the consumer mindset that does not recover?

The gym management company is working on a new business that encourages exercise at home. Originally developed equipment that allows you to exercise at home easily. We are planning to sell it for around 60,000 yen in Japanese yen in the future, as we can do more than 100 types of exercise.

In addition, the trainer's video relay was posted online.

A trainer introduces exercises that use familiar items such as PET bottles, and is looking for a new business to compensate for the decrease in membership.

Mr. Kinryu, the head of the gym, said, “I have taken advantage of the reflections from this infection to do a lot of lessons online. I think exercises that can be done at home will be our new business model.” , He said, without new businesses that are different from before, growth cannot be expected.

"World's factories" get cold due to sluggish overseas consumption

Meanwhile, the manufacturing industry is also in a difficult situation. It is the case of Guangdong Province, which is said to be the “factory of the world”.

In early April, when I visited the factory of a shoe maker in Guangzhou, which has exported to Europe and the United States, it was in a quiet situation.

The notice attached at the entrance said, "Since overseas orders were canceled, production will stop from April. All employees will be on vacation."

This situation is continuing in Guangdong.

Breakthrough in mask production

"It has a bigger impact than the 2003 SARS and the 2008 Lehman shock. All plans go crazy and I feel heavy."

This was leaked by Mr. Heike, the manufacturer of shoe materials in Dongguan, Guangdong.

At the president's factory, overseas sales such as Europe and America accounted for 60% of the sales, but the order has been almost canceled so far. The factory could only operate every other day, and I could not participate in exhibitions abroad such as the United States where I was planning to exhibit.

From February to March, factories such as Guangdong Province had problems with the shortage of manpower due to the suspension of operations to prevent the spread of infection and the delay in the return of employees who returned home. Now that we have finally resumed operations in earnest, the spread of global infections has eliminated the evaporation of overseas orders.

What the president worked to maintain the employment of about 60 employees is "mask production".

Despite the large capital investment, we introduced a new machine and started production 24 hours a day from March. We also export overseas.

He said, "I have no experience and I am trying hard while studying, but I will do my best."

Workers affected by employment

The effect has also reached employment.

"1 piece, processing fee is 11 yuan (about 160 yen in Japanese yen)." In the

suburbs of Guangzhou, where many garment factories are crowded, a large number of workers surrounded the person in charge of the factory to get a job. . The appearance of people sitting on the side of the road without being able to find work is also noticeable.

Due to the large number of people, there were also scenes in which district managers rang sirens to drive out workers. When I talked to the workers who were gathering, they revealed the harsh reality.

“The unit price of work is about 10% cheaper than last year.”
“Many factories went bankrupt and the number of people looking for a job is increasing.”
“The amount of work has decreased. If I can not find it like this, I will return to my hometown. "

Circulation of adverse effects due to employment deterioration

Given this situation, experts have indicated that the V-shaped recovery of the Chinese economy will be difficult.

“We are delaying investment and restructuring personnel at stores and factories that have already been closed.” There is a movement to curb consumption as well, ”points out the weak recovery in domestic demand.

In addition, with regard to external demand, he said, "there is a risk that China's exports will fall below the Lehman shock amid the spread of infections worldwide".

If domestic demand and external demand continue to remain weak, the Chinese government's goal of "reconstruction and recovery" may have to be corrected.

China is now the second largest economy in the world. The ratio of the world economy to GDP is 16%, which is about 10 points higher than that at the time of the Lehman shock. If China's recovery path cannot be drawn as expected, it could lead to a delay in the recovery of the world economy including Japan.

Consumer sentiment, external demand. It is necessary to continue to pay close attention to the Chinese economy with these two keywords.

China General Administration
Minoru Yoshida
2000 joined
in charge of finance and trade in the Economy

Shanghai Branch
Kazutoshi Ishii
Joined in 1998
International Department, Guangzhou Branch, China Directorate

Takeo Baba, Guangzhou branch , joined in
2007, worked at
Akita station, Nagoya station, International department