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Pandemic Causes Biggest Drop In China's GDP In Decades

STEVE INSKEEP, HOST:

No big surprise but still big news that the world's second-largest economy contracted in the first three months of the year. China says its economy declined 6.8% as it shut down many businesses to fight the pandemic. James Mayger is the China economy editor for Bloomberg News. Welcome to the program.

JAMES MAYGER: Thank you for having me.

INSKEEP: What kind of winning streak just came to an end here?

MAYGER: You know, it's a pretty historic contraction. There hasn't been a quarterly contraction in China since at least 1992. So, yeah, when Bill Clinton was president, it was the first time this has happened. Probably most Chinese people don't have any memory of a time when the economy wasn't growing every quarter, so it's a pretty historic thing that happened today.

INSKEEP: That's amazing. I can think of two or three recessions in the United States in that period. And China never had a technical recession. And now it's gone down. Is this number real, 6.8% drop, according to the Chinese government?

MAYGER: I mean, there's always the doubt about Chinese data, not just on you know, the statistics out of Wuhan but also on their economic data. Is it real? Does it really show what's going on? I think everyone was expecting it to be really bad, and it is clearly very bad. You could argue that - I mean, if you look at some of the more high-frequency data, that it was actually even worse than that. But I think this is a pretty honest effort by the Chinese government to just sort of show exactly how bad it was and, you know, the depths of the contraction that they've had. So it may be worse than the numbers are showing, but, you know, it's still pretty bad.

INSKEEP: Big question here, I think, because China went through what the U.S. is going through, only earlier. Do analysts see this as a brief dip or a long-lasting dip in China?

MAYGER: I mean, that partly depends on what happens with the U.S. and Europe, which are China's two biggest export markets. If those countries - sorry - if the U.S. and the European nations don't come back quickly from the coronavirus, if they don't stop their lockdowns and return to normal economic activity, there's going to be very little demand for Chinese exports. And if that doesn't happen, then this dip in China is going to be longer lasting. You're also seeing a lot of companies that are still struggling to get back. They're having a lot of trouble getting, you know, parts and getting supplies.

So even though, you know, the Chinese government today was saying, you know, the economy is resuming, people - companies are back. People are back at work. You're still seeing stories across the economy of people who are still struggling, companies that are still struggling to get back to work. And you're still seeing a lot of unemployment. So unless there's a big - unless there's a quick rebound in the U.S., unless there's a - you know, the lockdown ends quickly and that happens in Europe, as well, this slump in China could continue on into the current quarter and possibly even later into the year.

INSKEEP: And very briefly, what about the reverse? Does a contraction in China suggest even more economic risk for the United States?

MAYGER: I definitely think so. I mean, you know, China's meant to be buying almost $80 billion extra in exports from the U.S. this year. This contraction means that that's going to be even harder to - I mean, that was unlikely to happen anyway. This contraction makes that even harder. And so that's going to be a bad for U.S. exporters.

INSKEEP: James Mayger of Bloomberg News, thanks so much. Transcript provided by NPR, Copyright NPR.

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