China leads the way in economic recovery

中国引领经济复苏

By Morgan Brady

While much of the world scrambles to prevent new coronavirus cases from stalling the fragile recovery from recession, China's economy is hitting its stride again and will end the year being more influential than ever as policy-led recovery continues.
 

China has largely contained the spread of the coronavirus, and the economy has quickly returned to growth. China reports that the country’s economy grew by 3.2% in the second quarter of the year, and is on track to expand by about 5% in the third quarter, as management of the COVID-19 outbreak drives a rebound in consumption and production activities.
 

China is likely to be the only country to regain its pre-crisis economic level of 80% by the end of 2020. As the world's second-largest economy, China was the only major world power to avoid a recession this year as COVID-19 forced lockdowns and crippled businesses.
 

While the global economy as a whole will contract by 5.2% this year, China's GDP is expected to grow by 1.6%. All told, China's economy is expected to be worth about $14.6 trillion by the end of 2020, roughly equivalent to 17.5% of the global GDP. Even without the disruption caused by the virus, China's share would have undergone growth this year, but China's ability to buck the worldwide trend is accelerating the growth in its importance to the global economy.
 

中国国内在很大程度上遏制了新型冠状病毒的传播，经济迅速恢复了增长。中国报告说，由于疫情受到了良好的管理，消费和生产活动发生了反弹，国内第二季度经济增长了3.2％，并有望在第三季度增长约5％。到2020年底，中国可能是唯一一个恢复其危机前经济水平80％的国家。作为世界第二大经济体，中国是世界上唯一避免了衰退的主要大国。尽管今年全球整体经济将萎缩5.2％，但预计中国的GDP将增长1.6％。预计到2020年底，中国经济总值将达到14.6万亿美元，大约相当于全球GDP的17.5％。即使没有这种病毒造成的破坏，今年中国的份额也将有所增长，但是中国抵御冲击和挑战的能力，体现了自身在国际上的能力和地位。本文为您解读中国经济复苏的原因，以及未来可能会遇到的挑战。
 

What is driving China’s recovery?

China achieved its relatively quick recovery through several measures, including stringent lockdown and population tracking policies intended to contain the virus. The government also set aside hundreds of billions of dollars for major infrastructure projects, and offered cash incentives to stimulate spending among its populace.
 

The payoff has been evident, as tourism and spending rebounded during the busy Golden Week holiday period in the first week of October. The festivities of this season celebrate the founding of the People's Republic of China and the Moon Festival, and this is usually one of the country's busiest travel seasons of the year. This year, more than 630 million people traveled around the country during Golden Week, nearly 80% of the numbers who traveled during the same period last year.
 

Tourist spending, meanwhile, recovered to nearly 70% of last year's level, reaching $70 billion. while movie ticket sales surpassed $580 million during the Golden Week holiday––just 12% shy of last year's record high.
 

As life is returning to normal in China, pent-up demand has finally been unleashed. Even before the holiday, China's economy had been picking up momentum. An official gauge of manufacturing activity indicates that it rose to a six-month high in September, while the services sector experienced one of the quickest rates of expansion in the past decade, reaching its highest level in nearly seven years.
 

Consumer spending is rebounding, too, which is yet another encouraging sign, despite economists’ concern earlier this year that China's recovery was too unbalanced, having been driven by a large number of state-led infrastructure projects, but with not enough consumer spending.
 

Moreover, in contrast to expectations of global supply chains moving away from China, it looks as if, at least for now, China's success in shaking off the COVID-19 outbreak and keeping factories operating has strengthened its role in global value chains.
 

Furthermore, direct U.S. foreign investment in China actually rose 6% in the first half of this year, according to China's Ministry of Commerce. Even as U.S.–¬China tensions have worsened dramatically recently, many U.S. multinationals remain keen to engage with China. American firms were likely encouraged by Beijing's decision to remove some barriers to investing in the country's financial sector.
 

Challenges ahead

While China's recovery has been strong, there are challenges ahead.
 

As in other countries, the pandemic has taken a heavy toll on China's poor and rural populations. The average monthly income collected by rural migrant workers fell nearly 7% in the second quarter compared to a year earlier. The hundreds of millions of people who fit that description typically work in construction, manufacturing and other low-paying but vital industries.
 

And low-income households in China—those who earn less than $7,350 a year—experienced more severe declines in family wealth than any other income group. This suggests that the recent recovery in consumption is likely to have been somewhat skewed towards higher-income groups.
 

Regarding U.S–China relations, while some economists express optimism that tariffs on Chinese goods will be reduced if former U.S. Vice President, Joe Biden, wins the American presidential election this year, others think the U.S.–China rivalry will continue regardless of the result of the vote.
Challenges notwithstanding, it is clear that China stands at the forefront in post-COVID recovery, and will maintain its position as a global economic leader.