It would be challenging for China to falsify 2020 GDP figures between 6% to 6.5% amid economic fallout from the coronavirus outbreak.
The Communist Party of China had come to grips of a decelerating economy, even before the deadly virus broke out. Officials blamed the slowdown on the trade war last year, and now they're blaming it on the virus. Party leaders appear to scapegoat everyone but themselves for China's downturn.
Bloomberg notes that government officials could lower the country's annual growth target in March from the 6% to 6.5% range, to about 6%.
China has injected tens of billions of dollars into its financial markets and the real economy to prevent a hard landing. People familiar with increased stimulus measures told Bloomberg that deficit spending and issuance of government bonds would be the support tools to cushion the economy, expected to be announced on March 5, or thereabout.
We noted even before the virus outbreak, that China's credit growth rapidly decelerated to the weakest pace since at least 2017, as a continued collapse in shadow banking, weak corporate demand for credit and seasonal effects all signaled that a massive rebound in China's economy was unlikely in 1Q20.
Bloomberg Economics said China's 1Q20 GDP figures could print around 4.5% Y/Y:
"That's a drop from 6% in the final period of 2019 and the lowest since quarterly data that begins in 1992. Most of China's provinces said before the virus became widespread, they're expecting slower economic growth in 2020, with at least 22 out of 31 major cities, provinces and autonomous regions cutting their targets as of January 21, according to their work reports which layout plans for this year."
The coronavirus shock from China has already sent commodities tumbling; for instance, copper futures are on the longest losing streak since 1986. Dr. Copper suggests China's economy is headed for a hard landing, along with continued deceleration across the world.
What does this all mean? Well, China was responsible for more than 60% of all new credit created globally in the past decade.
With a slowdown in the country gaining momentum, creeping economic paralysis unleashed by the coronavirus epidemic, hopes for a rebound in the second-largest economy to rescue the global economy have faded. This could only suggest the world is headed for below-trend growth.