MESOPOTAMIA NEWS TOP OF THE AGENDA – China’s Economy Contracts for First Time in Decades

China said its economy shrank 6.8 percent (FT) in the first quarter of 2020, compared to the same period in 2019. It was the country’s first contraction since the 1970s, signaling serious challenges ahead for the global economy.

China shut down parts of its economy (Nikkei Asian Review) in January to address the spread of the coronavirus. The government has since announced around $184 billion in fiscal measures to counteract its downturn. By March, China’s unemployment rate declined (Bloomberg) to 5.9 percent from February’s 6.2 percent, according to official numbers. While state media reports that the government plans to cut interest rates more to boost domestic demand, analysts say much of China’s rebound will depend on demand from abroad.

 
Analysis
“[Beijing] has so far avoided unfurling a huge spending package like leaders in the United States and Europe have done. Its economy has become too big and complex to easily restart like it did in 2008, when it unveiled a plan to spend more than half a trillion dollars,” Keith Bradsher writes for the New York Times.

“In many ways, other countries will be moving, in some sense, towards a more Chinese approach to national industrial self-sufficiency. But that movement, clearly, poses some long-run challenges to China’s economy,” CFR’s Brad Setser said on a conference call.