Gross domestic plummet: China’s historic contraction

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I mean, the headline was dramatic. It was a drop of 6.8% year on year in China's first quarter GDP growth, but also basically in line with expectations.

Simon Rabinovitch is our Asia Economics editor based in Shanghai.

We knew that the economy was more or less fully locked down for the month of February and kind of sputtering towards a restart in March. So the real focus of investors and analysts was on the detailed for the month of March. Looking at that, there was still some pretty bleak numbers. If you look at fixed asset investment and retail sales, they were down by about 15% year on year. More positively, industrial output was down just 1% year on year. A lot of the effort has been placed on getting factories back up and running. And those efforts are actually bearing some fruit.

I mean, how reliable would you say these numbers are? Certainly in past years there's been a lot of discussion about how China makes up and or cooks its books. And certainly there's been discussion about reported numbers of COVID19 infections and deaths and so on. Do you believe these numbers at face value?

I don't think it would be advisable to take them literally for what they're saying simply because there is the problem of figures being massaged. You could say in the past, equally. I mean, it's just been such a dramatic downturn that actually trying to get an accurate reading on how bad it's been is exceedingly difficult for any country directionally though they do accord with with general impressions of business people and consumers.

And around the world we've seen a lot of governments dealing with enormous economic stimulus packages. What has China's looked like so far?

So this has been one of the really interesting things about China's response to the crisis is that previous crises, previous slowdowns, you could count on China being the first out of the gate with the biggest stimulus. This time around it's looked quite moderate compared to actions in Americ, Britain, Germany, Japan, et cetera. So if you look at the fiscal support, there's been fee cuts for companies, there's been some tax cuts. In terms of monetary policy there, there have been some interest rate cuts, some additional lending by the central bank. But if you add it all up, it's only kind of 2 or 3 percentage points of GDP. China looks like it's been holding a lot of firepower in reserve. Now I think, I think there's two things that are going on. One is that the stimulus packages in other countries are to a Big extent aiming at basically backstopping the financial system. But the fact of the matter is that in China, where you have a state owned financial system to large extent, and the biggest borrowers are state owned companies, the government doesn't need to provide the same layer of guarantee. Implicitly, it's already there. The second point is that the expectation is that they will want to crank up the stimulus. But generally speaking, economists here think that it's too early to do so. That although the pandemic is, you know, relatively under control and there's still very much the risk of a resurgence of new infections if they get back fully to business too quickly. So they're, they're basically playing for time right now.

Well, you've spoken both about the sort of supply and the demand effects here. What about employment? What about work?

I mean, this is the big worry for the government here, as it is for governments, you know, most anywhere. Frustratingly, the data on unemployment in China is really poor. It's not just because they're trying to disguise the reality. It's also just because very difficult for them to measure the labor market when you've got tens of millions of people who move between rural areas and urban areas back and forth. Officially, the unemployment rate has gone from 5.3% before the coronavirus crisis to 5.9% today, which isn't all of that big of an increase. Unofficially, estimates are that tens of millions of people are basically hunkering down in their hometowns, not coming back to cities, to factories for work. So it is a really serious situation. You know, one indicator which I think give us a better read on how weak the labor market is is income growth, which has historically, for the last couple decades been very strong in China for the first time ever, in real terms, it was actually negative in the first quarter. So the labor market is a big worry. And I think that's the thing which ultimately is going to push the government into doing a much more aggressive fiscal and monetary package to prop up growth.

Well, on the notion of bouncing back though, there's been a lot of discussion about how the world and individual countries will rec when the pandemic passes. What do you expect in the next set of numbers, the next quarter?

I'd say it's all but certain that China probably has passed the low point. So you would expect that the second quarter numbers are going to be stronger. Question is how much stronger. They're facing two big headwinds. One is that obviously the rest of the world is in really bad shape right now. China, you know, still is connected to the rest of the world. It's not an export led economy, but exports do matter for the economy. Global supply chains do matter. For China, it's very difficult for China to get far ahead of other countries with its recovery. That's not going to happen. And then the second headwind, you know, as every country is dealing with this with the question of when you begin to undo the lockdowns is how do you do that safely? So I think we will see stronger economic data in the second quarter, but we're not looking at the V shaped rebound that people had hoped for.

Simon, thank you very much for joining us.

Thank you, Jason.

You can get a lot more analysis like this by subscribing to the economist. To get 12 issues for $12 or 12 pounds, just go to economist.com radiooffer. The homeless have been hit particularly badly by COVID 19. Conditions have become harder as shelters and soup kitchens have closed. And for those who make their way by busking and begging, sources of income have dried up. But it's possible that swift efforts to help in some countries during the pandemic might be a hopeful sign for the homeless after it.

They are a particularly vulnerable group because of often their own health and because it's very hard for them to follow government guidelines about how to look after themselves. An extreme example of this is in France, where some homeless people have reportedly actually been fined for leaving homes they don't even have and being on the streets.

Simon Long is the Economist's deputy digital editor.

But on the other hand, it is a time when precisely because they are so at risk and hence so at risk of infecting other people as well, more is being done for them in many countries than in normal times.

So why is it that homeless people, a vulnerable population to begin with, are particularly vulnerable now?

Well, you have to think about the circumstances that homeless people live in and the sort of health they may be in to start with. In general, their health is not as good as that of the rest of the population for obvious reasons. A study in the United States and Canada, for example, found that people on the streets under the age of 65 are between 5 and 10 times more likely to die of any reason than people of the same age in the general population. In Britain, charities say that they are, I think, two and a half times more likely to have asthma, far more likely to have tuberculosis than most people. And so since those conditions can make COVID 19 fatal, they're particularly at risk. And the other consideration, of course, is that we all know the advice that governments give the whole time about what to do in this crisis. They're stay at home, shelter in place, go out only if essential. In other words, follow advice that is completely inapplicable to people who are sleeping on the streets and don't have anywhere to go. And in particular, it's very hard for them to follow social distancing guidelines, even on the streets, but particularly if they go into a shelter, which tend to be very crowded places.

And what measures have authorities have governments taken to try to protect these homeless people?

Well, you've seen a surge of activity in a lot of countries and that has involved opening new shelters. Obviously, there are a lot of spare places at the moment, public buildings that can be converted into shelters, youth hostels, which is empty, that in some countries, such as France, Austria, Germany, youth hostels have been converted for this purpose. In some places, under occupied old people's homes in Melbourne, for example, have been used. More fundamentally or more radically, a solution that a lot of governments are adopting is putting homeless people into hotel rooms. And this is obviously also a byproduct of the pandemic that many hotels are standing empty. And since these offer individual rooms, in many cases, they are far better places, safer places for the homeless people to be put into and exercise social distancing.

And how are all of those measures working out, especially at the speed they're being demanded?

Obviously, they are not being met quite as fast as homeless charities and indeed governments themselves would like. In London, over 1,000 people, that's most of the people on the streets, have been put into hotel rooms across the country. Out of the total in England of about four and a half thousand who were sleeping rough, there are now about 500 to 600 still on the streets. So it has had some success. Similar rates, I'd say, across the world. The United States has adopted a similar approach in many places. In New York, Los Angeles, San Francisco, there have been efforts to get homeless people into hotels, and it's gone far more slowly than people hoped, but it is beginning to happen.

But has it gone successfully at least? I mean, how have the homeless responded in the places where this is going on?

Some people have resisted going into hotels, not because the comfort doesn't appeal, but because they fear their lifestyle being disrupted. That's particularly true of those who have a drug habit. They fear that if they go into hotels, they may lose contact with their dealers. Not just those with drugs or alcohol problems, but all of them, of course, often rely on begging as their only income. And that becomes impossible if you're not on the streets.

And what's your view on how things will go once the pandemic is over? With these sort of radical changes and the conviction now that radical change can take place in short order, do you think that what's been learned during the pandemic will carry on in any meaningful way after?

Well, they're clearly going to be big difficulties. I mean, firstly, with the economic downturn, we might see more people being rendered homeless and coming onto the streets. And people, there are reports already of large numbers or significant numbers of women suddenly being made homeless because of the rise in domestic violence that has accompanied the quarantine measures in a lot of countries. Looking at the ones in hotels, clearly those rooms are going to have to be vacated and be put back to the use of the hotel owners for whom they are lucrative assets not intended for charity. So clearly there are going to be enormous difficulties in keeping the numbers of rough sleepers down when the pandemic passes. On the other hand, what homeless charities point out is just how much has been done, how quickly under the pandemic in this country, for example, on March 26, the government wrote to local authorities telling them to get people off the streets by the weekend. That was within three days. That contrasts with its earlier target of ending rough sleeping by 2024. So the optimistic take on all this is, look how much can be done, how quickly, when homelessness rough sleeping is given the priority in normal times that it's received during the pandemic.

Simon, thank you very much for joining us.

Thanks for having me, Jason.

To follow all of the Economist coverage of the COVID 19 pandemic and how it's swiftly reshaping the world, visit economist.com Coronavirus.

The most formative moment in Joseph Lowry's life happened when he was 11 or 12 years old.

Ann Rowe is our obituaries editor.

His father kept a sweet shop in Huntsville, Alabama, and Joseph was in there one evening when a white police officer came in. The officer told him in no uncertain terms to get out of the way. Didn't he see there was a white man coming in the door and he hit him in the belly with his nightstick. He was furious when he heard this. He ran home. He was crying. He wanted to get whatever weapon he could. He knew his father had a gun. He would try and get that and go back and shoot that officer dead. But he and his father found him, luckily in time, caught him on the step, and taught him a very valuable lesson in non violence. You can struggle you can be angry, but the true answer is to respond with love. He did various jobs for many years. He became a newspaper man in Alabama, and this put him in touch with all these stories of discrimination, segregation that were around at the time. And all the time he was hearing the call of the Lord to become a preacher. He went on a seminar course to Boston one year, and it was there that he met Martin Luther King, who was already making quite an impact in Montgomery, Alabama. Let us never fight with father and violence and hate and malice, but always fight with love. At the time, there was a big bus boycott going on in Montgomery, which Martin Luther King was organizing, and he was campaigning to get public transport completely desegregated in the city. And as it happened, Joseph Lowry had already tried this in Mobile. Mobile was a fairly closed city, and the two of them gradually joined forces together. In the mid-50s, they started the Southern Christian Leadership Conference, the SCLC, which became an extremely important organization. It brought together many of the heads of black churches in the south to lead the campaigns against segregation and discrimination, to fight for civil rights and to get the vote. Their whole attitude was that they would march, they would have sit ins and boycotts, and this was the way peacefully to protest. And in fact, it turned out to be the method that worked.

Some very sad news for all of you and people who love peace all over the world, and that is that Martin Luther King was shot and was killed tonight.

The worst moment probably in his life was when Martin Luther King was shot in Memphis in 1968. Joseph Lowry wasn't with him that day, although he'd been with him the day before. And they had had a meeting with other ministers. And at the end of it, Lowrie had said in words that seem rather prophetic now, the Holy Spirit is in this room. He felt that something extraordinary was about to happen, and indeed it was. But of course, it was devastating for him and for the movement because Martin Luther King was the president of the Southern Christian Leadership Conference. Lowry was his deputy. The leadership of the organization was left vacant. They were still in the middle of the struggle. In 1968, they'd got the Civil Rights act, they got the Voting Rights act, but everyone was aware there was still a very long way to go. After the death of Martin Luther King, the SCLC fell into hard times. It lost a lot of members. It lost money. Joseph Lowry was not running it then, but he was still active in it. And in 1977, he was picked to take it over, and he really transformed it, deciding that the way forward was not merely to be an organization that helped blacks get equality with whites, but one that fought against inequality in all its forms so that it, it supported, say, gay marriage, it campaigned against police brutality and the death penalty, and in particular, campaigning against apartheid in South Africa. He organized boycotts of grocery stores around the South. And in the end, of course, apartheid was lifted in South Africa. It seemed that whenever he had applied the force of his life, because that was doing the work of the Lord, what he wanted to happen could only come to pass. One thing he never expected to see was the inauguration of a black president. And he could still hardly believe it. When Barack Obama began to run for President in 2008, he was so delighted that the. This young, energetic black man was running. And so it became a natural thing that when the inauguration was being planned, he was asked to give the benediction at the end of it.

We pray now, O Lord, for your blessing upon thy servant Barack Obama, the 44th president of these United States, his family and his administration.

Some of his supporters said, well, you should do the invocation because that's the most important, the longest speech. But Joseph Lowry was very happy just to give the benediction because he felt then he would have the last word. There would only be the Star Spangled Banner after him.

We ask you to help us work for that day when black will not be asked to get back, when brown can stick around, when yellow will be mellow, when the red band can get a head man, and when white will embrace what is right.

He had never much liked the Star Spangled Banner, what with all those bombs bursting in air and so on. He'd always been a most intrepid anti war campaigner. But as he heard it that day of the inauguration, it sounded better than it ever had before. It wasn't that the anthem had changed, it was that the whole country had changed. That country, where he had been a small boy pummeled by a white police officer, where he had been yelled at, where he had been insulted, suddenly seemed to be on the brink of. Of a great resurrection, of feeling a great change. And that was why, at the end of the benediction, he found himself crying just as much as he had cried when he was hurt that day in Huntsville.

Let all those who do justice and love mercy say amen. Say amen and amen. Amen. Ann Rowe on Joseph Lowry, who's died aged 98. That's all for this episode of the Intelligence. If you like us, give us a rating on Apple podcasts and see you back here on Monday.