Chinese economic data is a warning sign for the rest of the World

Early numbers from the U.S point to some very rough times ahead

China, which was originally the epicenter of the ongoing COVID-19 pandemic, seems to be turning a corner economically. The economy is running at two-thirds of its full capacity as businesses start to come back online slowly. To avoid a blowback, it has banned almost all foreigners from entering the country starting Saturday.

As the local cases of the pandemic die down, the country is wary of re-igniting the outbreak with most of the cases now located elsewhere in the world. Economically, however, the damage has been done. Looking at the early data for the first two months, the sharp losses are evident across the broader economic spectrum in China. And this might be the evidence of what’s to come for other global economies.

While the country might be coming out of the supply shock as the manufactures and shop keepers open for business, the demand shock is probably going to be a little more prolonged one. Domestic demand might not pick up right away as people are afraid to revert to their old spending habits, especially on discretionary items. owing to emotional stress, job losses & credit squeeze.

In a survey conducted by a Beijing financial firm, almost 65% of respondents plan to “restrain” their spending habits after the virus. Apart from the domestic demand, China depends a lot on its exports to its trading partners. And with its biggest trading partner, the USA, now becoming the epicenter of the World and facing stiff economic decline, the picture is not too pretty (charts below).