Consensus estimates suggest that while Chinese gross domestic product (GDP) growth will fall to 2.5 percent from 6.1 percent in 2019, with other large economies entering recession China will once again be the primary source of global growth. China’s first quarter GDP was down 6.8 percent relative to the first quarter of 2019 – relatively close to the consensus estimate from 57 analysts of a contraction of 6.5 percent, and materially better than many of the estimates of double-digit contraction, according to a new briefing from Peter Reynolds, Partner and Head of Greater China at Oliver Wyman and Sean Kennedy, Partner and Head of Finance and Risk and Public Policy for Asia Pacific at Oliver Wyman. Guy Carpenter is an affiliate of Oliver Wyman.
As of mid-April, signs of recovery can be seen across China, with some schools re-opening, the manufacturing purchasing managers’ index (PMI) rebounding, and people once-again traveling. Much discussion focuses on the speed of China’s recovery, with three broad paths hypothesized: A “V-shaped” recovery, A “U-shaped” recovery or An “L-shaped” recovery. Oliver Wyman believes that this debate is too simplistic: there is a tendency to treat China as one single economy. In our experience this significantly underestimates the heterogeneous nature of China, with huge dispersion geographically. Different sectors of the Chinese economy will experience recovery very differently, and competing influences will shape the path of growth over the next 12-months depending on the sector concentration in each region. This will result in an aggregate “blend” of V, U and L-shaped profiles – the weighting of each allowing different scenarios for the overall economic picture.