How soon will economies recover from the coronavirus pandemic? Look to China for answers

Going by China’s experience, it could take countries over three months after lockdown restrictions are eased to get their economies back on track. Economic activity could return to normal levels by the last quarter of 2020

Reading Time:3 minutes

Workers on the floor of Galanz factory in Foshan, China, on February 18. Industrial production saw a V-shaped recovery after lockdown restrictions were eased. Photo: EPA-EFE

Published: 9:30am, 6 May 2020Updated: 9:34am, 6 May 2020

How will the Covid-19 pandemic affect the world’s economies? Given that China was the first country to impose stringent lockdown measures, and also the first to lift them, an examination of China’s data could help us understand the impact of the coronavirus if one takes a sectoral approach.

After all, the service sector seems to be hit harder and for longer. Unfortunately, the sector is in for a slow and fragile recovery.

First, let’s take a look at China’s first-quarter gross domestic product report by sector, which reveals a clear split. While most sectors – particularly hotel and catering – saw a plunge, the finance and information technology sector reported positive annual growth. The outperformance of IT is clearly due to the surge in online shopping and huge demand for cloud services as many people needed to work from home.

However, the positive growth of the finance sector, which largely comprises the banking sector, is because the government has taken a countercyclical approach and encouraged financial institutions to support virus-hit corporations.

Next, let’s dive a bit deeper into consumption, which accounts for almost 60 per cent of China’s economy. While food consumption grew sharply during the coronavirus outbreak, discretionary consumption, including cars, jewellery and catering, reported at least a 30 per cent drop in the first three months of 2020.