China Research

China noted a relatively sharp GDP decline by 6.8 percent in the first quarter of 2020 (year on year) and by 9.8 percent compared to the previous quarter. This is line with average expectations which, however, had a very broad range of numerical forecasts. If traditional overestimation is assumed in those numbers, reality could even have been somewhat worse. However, the next quarter – when people to a high extent have come to work – will give some more clarification. Anyway, the official growth objective for 2020 at around 6 percent cannot be met anymore. It should be added that there is no way to make a reasonable GDP forecast for 2020 at this very moment.

Compared to my previous scenarios it may be said that the third V-curve scenario (see below) may be in line with the official numbers for Q1. China may still go for a V curve – but for a somewhat milder one compared to the toughest alternative that included both a very sharp downturn and a very strong recovery later this year.

GDP statistics for q1 may still open for politically acceptable growth numbers when coming close to the important 100-year anniversary of the Communist Party next year (if a second corona wave can be avoided).

Some background considerations

For the first time since quite some time ago, a quarterly change of Chinese GDP was not predictable for q1. The effects of the corona virus on demand and production did not allow for any plausible “guesstimate”. As indicated earlier in this blog, I assumed that the q1 number for China’s GDP would be partly politically set – with two or perhaps three options (see my blog chinaresearch.se from March 25 and April 14).

My theory that GDP growth to a considerable extent would be politically determined receives probably momentum also during 2020, the year before the 100-year anniversary of the Communist Party. Chinese political leaders would certainly dislike a weak economic development also later in 2020 and in 2021 – despite the corona excuse. This argument certainly urges for a relatively nice economic recovery starting at least in the latter part of 2020 or in the beginning of next year. Will it work?

In this context, my first option in previous publications was a relative sharp downturn in q1 and perhaps also in q2 – but then followed by a relative strong recovery, something like a short-lived and steep V curve. My second option was still a V curve – but less deep and steep and also somewhat more extended than in the first option. A third option could turn out be a forthcoming GDP curve between these first two V curves – but not really recognizable as an alternative on its own. This version may have been indicated today by the official 6.6-percent drop in q1.

One conclusion, however, can be made already today: The analysis of China’s GDP development in q1 should not be exaggerated. Circumstances were simply too special.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
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I get puzzled every day about China’s numbers for new corona infections. They are extremely low and very even – mainly between 30 and 60 new cases on a daily basis (but with a very limited increase to around 100 people since two days ago). This accuracy may remind China observers of all the even GDP-increases from quarter to quarter in the past years.

To me, Chinese corona statistics still appears as a conundrum. This feeling of mine can be seen as a result of long-lasting shortcomings in transparency and statistical quality. However, I would appreciate to read soon at least some illuminating or clarifying (partial) answers to the following ten questions:

1) What is the explanation for the reported stability of new infection cases, since several weeks ago daily at very low levels?

2) When making comparisons to other – also very advanced – countries: Why are the Chinese numbers for recovered infected people and total deaths so extremely low?

3)  What about the risk for a second corona wave, particularly in Wuhan – and what is done to prevent China from new wave infections in other parts of the country?

4)  What can be said more exactly about the geographical distribution of corona infections?

5)  Are there – though very uncertain – any statistical indicators available, like the time for doubling infections or the so-called reproduction value (i.e. the number of new infections caused by one already infected person)? Are there any statistical improvements worth mentioning?

6)  How big – or rather small – is the fraction of the Chinese population that has been tested?

7)  What is the age distribution for corona-infected people so far? What about the elderly?

8)  How is the official position as regards wildlife markets? Are there strict limitations now?

9)  Are there statistical numbers for people who have returned to their corona-affected jobs?

10) How will the statistical, i.e. political strategy look like for GDP growth in the first quarter? (Are there official hints for interpretation: down more sharply and looking for a good recovery – or a more moderate fall for preserving the face and, consequently, a more modest recovery?). To be published on April 17.

More questions could be raised. Of course, I know that certain questions cannot be answered right now or in the best case only partly – as it is the case in certain corona issues in our part of the world. But I also know that the Chinese could give us a lot of experience and conclusions from the most terrible days in Wuhan, about current conditions there and in the rest of their large country.

An opportunity for China

Since the corona virus indeed is a very global phenomenon, I feel sure that the whole world could benefit from sharing more Chinese openness and transparency in the whole corona issue – and so could China benefit itself.

For example, it seems to be the case – when following debates on TV or comments in the press – that many or even most Western virologists have no clou about how the Chinese system is functioning. How could they? But they do need better information about China as country and about the characteristics of the ongoing corona crisis to come to important conclusions for the future.

Wouldn’t it be a good idea for China to contribute actively to this badly needed improvement of international understanding and research? This could be beneficial for the whole world – and certainly for China as well, also when it comes to the creation of good will outside China.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

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I have written before that China in recent weeks had low numbers of new corona cases, currently around 50-75 people on a daily basis – extremely low compared to other strongly affected countries. Consequently, the question shows up regularly whether China really has been successful in combatting the corona virus, i.e. whether the curve for corona infections really has been flattening out or even has started to go down.

My own long-lasting experience from application of Chinese statistical numbers is not really positive because of obvious qualitative shortcomings and lagging transparency. This is a historical burden for China also these days. It takes such a long time to create, improve or restore credibility in these respects. And if improvements finally really occur, they may not reach or convince previously doubtful (foreign) analysts.

Some weeks ago, I suggested in this blog that China unexpectedly could achieve  quite some gain in credibility once statistics on corona developments appear more reliable. However, doubts still seem to be motivated if such a change already has  happened yet or is intended to happen any time soon. As mentioned above, current numbers from China on new corona cases look by far too low compared to other countries (but I am no virologist). For example, it seems to have a negative impact on corona numbers that local authorities so far were not obliged to register those infections publicly that had no obvious symptoms of the disease. One can imagine that such organizational problems or downsizing attitudes also exist in other countries.

Things do not look encouraging either when watching the Chinese press and their positive reports on international recognition of Chinese corona efforts. However, I certainly would refrain from recommending Western virologists and other researchers to stop listening to Chinese experts about their fight against the corona virus. However, foreign analysts should be careful about directly using Chinese numbers in their studies. Learning about non-numerical Chinese corona experience may be very useful all the same.

And why shouldn’t strongly affected countries in Europe and other parts of the world resist to accept Chinese deliveries of corona-protective equipment to their hospitals? Even if China tries to use such support for gathering sympathy points from abroad?

We all live in a global community. All countries should assist and help each other whenever possible when human touch is needed.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

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