Some areas of industrial output grew quite rapidly. Perhaps unsurprisingly, manufacture of medicines grew by 10.4% for the year to march. Manufacture of industrial robots grew 13% for the year to March. Maybe those robots are going to be much more useful in Chinese factories...
In China, the perception of risk to the Chinese economy of a resumption of coronavirus is far less than that risk to the Chinese economy is perceived in the west. Should the Chinese leadership be right we will see a rapid reacceleration of the Chinese economy which should absorb all of the loss of output this year. After a 9.8% fall in GDP in Q1 2020 the Chinese economy is assumed to grow by 11% in the only three quarters remaining in 2020. This provides a final result of 1.2% for calendar 2020. The economy is then expected to grow by 9% in 2021.
Should the Chinese leadership be wrong, there may be a significant recurrence of Coronavirus when China gets into winter. This would damage Chinese output in the fourth quarter of 2020 and the first quarter of 2021. Should another wave of infections arrive, then the positive outlook suggested by the IMF is significantly at risk.
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We are left with two forecasts: An optimistic outlook of the IMF based on low Coronavirus impact in China and a more pessimistic outlook based on a high impact of Coronavirus, should it return in winter. We will have to wait till the end of winter to find out which forecast is correct.
This article was first published by Morgans.
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