03/03/2020, 14.58
CHINA - ASIA
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OECD: China’s weakening GDP to affect global economy

Due to the coronavirus, China’s economy will grow less than 5 per cent in 2020. The global economy will lose half a percentage point. Japan, South Korea and Australia will be the most affected by China’s difficulties. World stock exchanges have been going up and down. China is betting on infrastructure, but it could be a mistake.

 

Paris (AsiaNews/Agencies) – According to the Organisation for Economic Cooperation and Development (OECD), global economic growth should drop to 2.4 per cent in 2020, with the possibility of it being negative in the first quarter of the year.

The sharp downturn in the Chinese economy due to the spread of the coronavirus (Covid-19) will lead to a loss of global GDP of 0.5 per cent. Japan, South Korea and Australia are the most at risk, given their interdependence with China.

China’s GDP is expected to drop to 4.9 per cent this year (from 6.1 per cent in 2019), whilst South Korea’s should grow no more than 2 per cent. Japan will have to deal with zero growth.

The figures could even get worse if the epidemic is not resolved quickly. The spread of the virus has affected investor confidence, seriously damaged the international transport sector and weakened the global supply chain.

The OECD warns that stock markets face dangers. In the past months, they have been on a rollercoaster.

After heavy losses last week, Wall Street’s latest rise has pushed up almost all Asian shares. The willingness of the main central banks to stimulate growth has favoured the recent rebound.

A clearer picture will have to wait for the next moves of the Chinese government. Beijing seems oriented towards injecting greater liquidity (more than a trillion yuan have been allocated at present) and implementing an infrastructure investment plan.

Some 31 Chinese provinces have reportedly submitted investment projects worth 3.5 trillion yuan (US0 million) for 2020 alone.

Local companies suggest that such liquidity be invested in key sectors, such as 5G networks, artificial intelligence, smart cities, the Internet of things, education and healthcare.

In 2008, the mortgage loan crisis in the United States led Beijing to adopt a four-trillion-yuan (US2 billion) infrastructure spending package.

But for some observers, it would be a mistake to repeat this strategy, given that the country's corporate, household and government debt broke through 300 per cent of GDP last year.

In their view, China’s current problem is not the lack of internal demand, but the collapse of production.

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