More indications of massive Q1 economic contraction

Joint data from January and February, released a week ago, gave the first official indication that China’s first quarter might be headed for a historic contraction.

Now the China Beige Book, which surveys more than 3,300 Chinese businesses every quarter, found, per Bloomberg (porous paywall):

“A 10-11% GDP contraction is not unreasonable” this quarter, according to the report, with any recovery dependent not just on domestic resilience, but also factors beyond the government’s control, according to the report. “China may also have to admit to poor Q2 numbers on global weakness. Investors may therefore be severely overestimating the extent of China’s recovery and hence the extent to which China can cushion a global downturn.”

There’s no reason to think the household is any better off, the report said, with a contraction in employment across every sector. The quarterly report is based on data and interviews with more than 3,300 firms between February 13 and March 12.

Shehzad Qazi, managing director at China Beige Book, told CNBC that the “larger takeaway is clearly that return to work has not meant return to growth for China (at least not as yet).”

The property market is also struggling to recover, the China Beige Book report indicates, according to the Financial Times (paywall):

Despite the efforts by Beijing, the property market, which some analysts estimate accounts for about 25% of the country’s gross domestic product, has not returned to normal in March — and may even be getting worse.

China’s Beige Book…index for property sales volume contracted 11 points to -49 in March from -38 in February…For the first quarter of 2020, the sales volume index showed a reading of -29, compared with an expansionary reading of 70 in the first quarter of 2019.

See also, in Xinhua: China to promote work resumption of manufacturing, circulation industries amid epidemic.

—Lucas Niewenhuis