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China made history today. The country's first quarter GDP dropped 6.8%. That means China's economy got smaller for the first time since it started releasing such data in 1992. It's a sign of the economic impact the coronavirus has had on the world's second largest economy. NPR's Emily Feng reports.
EMILY FENG, BYLINE: Li Shijian is a manager at the Honda Dongfeng car factory in the city of Wuhan, making hundreds of Honda Civics a day. Getting up and running in March was not easy.
LI SHIJIAN: (Speaking Chinese).
FENG: The government arranged transportation to get thousands of us workers back, Li says. Every worker must list potential exposure to the virus and submit to daily temperature checks. All these requirements meant only the largest of companies have been able to fully reopen on time.
GABRIEL WILDAU: For most of February and March, large swaths of the economy were just shut down.
FENG: Gabriel Wildau is lead China analyst at advisory firm Teneo. He says manufacturing is up and running again.
WILDAU: Other sectors like retail, tourism, restaurants, entertainment are coming back a lot more slowly since Chinese consumers are still wary of gathering in groups.
FENG: That's why China broke its economic growth streak today. The last time it admitted its economy shrunk was in 1976, though quarterly GDP wasn't released then. So now, China faces a big decision. Does it stimulate its economy by making credit cheaper and letting companies take on more debt? That could jumpstart job creation, but it risks destabilizing its financial system and leading to economic waste. Here's Michael Pettis, a finance professor at Beijing's Peking University.
MICHAEL PETTIS: The real impact of COVID-19 is not in lower GDP growth but in a big transfer of GDP growth from good growth...
FENG: Like retail consumption.
PETTIS: ...To bad growth.
FENG: Things like redundant and environmentally harmful infrastructure projects. Today's negative GDP figures mean China's ruling Communist Party might have to abandon an important political milestone. It aims to double its annual GDP between 2010 and 2020. Theoretically, that's still possible.
PETTIS: But they would have to unleash so much useless spending and such a big surge in debt that I think even they agree that it makes no sense.
FENG: Whatever China does, the rest of the world is watching closely. They, too, must reckon soon with the painful economic fallout of COVID-19. Emily Feng, NPR News, Wuhan, China.
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