Chinese GDP Preview: How first corona contraction data will rock markets, regardless of reliability

  • Economists expect China to report the economy squeezed by 6% yearly in Q1 2020.
  • The world's second-largest economy is the first to provide coronavirus-related GDP figures.
  • Markets' reaction to Chinese trade figures shows the figures matter, regardless of doubts.

Well before the world knew where Wuhan is on the map, investors suspected statistics from China – especially when it comes to Gross Domestic Product. Nevertheless, the publication early on April 17 will likely be watched closely and impact all markets. 

Reasons to be doubtful

Li Keqiang, then the  Party Committee Secretary of Liaoning, told the US ambassador that GDP figures in his region were unreliable. That was in 2007 before Keqiang was promoted to Prime Minister. He offered alternative measures for assessing the size of the economy, such as electricity consumption, railway cargo, and other indicators that The Economist later turned it into the Keqiang index.

Governors and the state had reasons to report rosier figures than reality suggested. Moreover, Beijing's targets were normally met with incredible precision, also raising eyebrows. China's orchestration of a "smooth landing" from quick growth seemed to be smoothed by official statistics. 

Moreover, China compiles and publishes GDP data less than three weeks after the related quarter concludes and refrains from revisions. Western countries need more time and modify the data as time goes by.

COVID-19 also added to doubts. Authorities initially sought to play down the cluster of pneumonia cases in Wuhan, punishing whistleblower doctors before changing its approach. The number of mortalities from the disease is also seen as too low by many, amid anecdotal reports of crematoriums working non-stop in Hubei province, where Wuhan is situated. 

Why it matters to markets

Having said all that, why should traders await China's first-quarter growth figures? The main reason is the virus. So far, higher frequency data has provided up-to-date – yet partial – data about COVID-19's damage. China will be the first major economy to provide an overview of the impact on the economy. The world's second-largest economy was also the first to suffer from coronavirus and lockdown citizens.

Another reason to expect market movement is the impact of the figures on policy in China and in other places. If Beijing publishes upbeat figures, it may provide for other countries – expecting less damage and more demand from China. On the other hand, weak figures may further depress the global economy. 

The third motive to expect a meaningful reaction is viewing the response to China´s trade balance figures for March. The better-than-expected outcome in both exports and imports improved the market mood on Tuesday, sending stocks higher and the dollar down, with the impact lasting long hours. Commerce figures are less significant than GDP statistics, so traders may expect a substantial move when the data comes out. 

Expectations and reactions

Economists foresee an outright contraction of 6% in the first quarter of 2020, mirroring the growth rate of 6% seen in the last quarter of 2019. That would be the worst in modern memory. Even in the 2008-2009 crisis, the economy kept expanding. 

Chinese GDP growth 2010 2020 statistics

The projected market reaction is straightforward. If Beijing reports slower contraction than expected – a figure closer to 0% – markets would cheer, sending shares higher and the safe-haven dollar and yen lower. The Australian dollar may be one of the biggest beneficiaries as Australia depends on China more than other developed economies. Oil prices could rise on hopes for higher demand, boosting the Canadian dollar

On the other hand, deeper damage to the economy – over 6% contraction – would weigh on equities, boost the safe-haven currencies and drive commodity currencies lower. 


China's first-quarter GDP figures will be the first broad economic report on the impact of coronavirus on a major economy with a contraction of 6% on the cards. Better figures may boost markets and weigh on the dollar while weaker statistics could trigger a sell-off and gains for the greenback. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content

Recommended Content

Editors’ Picks

EUR/USD holds above 1.0800 after German and EU PMI data

EUR/USD holds above 1.0800 after German and EU PMI data

EUR/USD holds above 1.0800 in the European session on Thursday. The data from Germany and the EU showed that the business activity in private sector expanded at an accelerating pace in May, helping the Euro find demand. US PMI reports will be published later.


GBP/USD clings to small gains above 1.2700

GBP/USD clings to small gains above 1.2700

GBP/USD is clinging to recovery gains above 1.2700 in European trading on Thursday. The PMI data from the UK showed that Composite PMI edged lower to 52.8 in May (preliminary) from 54.1 in April, limiting Pound Sterling's gains ahead of key data releases from the US.


Gold price extends the downside on Fed's hawkish stance

Gold price extends the downside on Fed's hawkish stance

Gold price trades with a negative bias on Thursday. The hawkish stance of the FOMC minutes from last month's meeting might cap the precious metal’s upside. Investors will focus on the first reading of US PMI data for May, due on Thursday.  

Gold News

As Ethereum spot ETF approval nears, these altcoins could explode

As Ethereum spot ETF approval nears, these altcoins could explode

It is not surprising that altcoins related to Bitcoin saw a major rally post-Bitcoin spot ETF approval. Likewise, tokens closely related to Ether could ride the ETF approval wave. Ethereum Classic, Pepe, Floki and other DeFi tokens could gain momentum as the ETH ETF approval deadline nears. 

Read more

US S&P Global PMIs Preview: Economic expansion set to persist in May

US S&P Global PMIs Preview: Economic expansion set to persist in May

On Thursday, S&P Global will issue its flash estimates of the United States (US) Purchasing Managers Indexes (PMIs), a monthly survey of business activity. The survey is separated into services and manufacturing output and aggregated into a single statistic, the Composite PMI.

Read more