Big Splash – In a world mired in recession, China is running a V-China recovery

Big Splash - In a world mired in recession, China is running a V-China recovery

TheNE scene More than anything else from the coronavirus recovery in China, it caught the world’s attention: a giant rally in August in Wuhan, the city where the epidemic began. Nearly four months after their 11-week lockdown, revelers huddled together in waist-to-waist waters, jumping and screaming in rejoicing DJ Weave heavy bass beats. The video spread quickly. It was a moment of pure emancipation and a sign of how far China has advanced far behind most other countries in returning to normalcy (of sorts). Economic data is rarely as exciting as pool parties, but it’s the latest China data Gross domestic product The numbers, released on October 19, were, roughly, the statistical equivalent of the Wuhan Water Festival.

Officials reported that the economy grew by 4.9% in the third quarter compared to the previous year, at a stark contrast to the pre-pandemic pace. While most other countries are mired in recession and grapple with a new wave of cases of coronavirus, China has just completed the upward phase of FifthShaped recovery. Analytically, its success is easy to explain. China got one important thing right. By virtually eliminating the virus, I was able to allow the resumption of activity with few restrictions. Schools are completely open, factories buzzing and restaurants crowding. Crucially, China is also fortunate. It is better insulated from weak global demand than smaller peers like New Zealand who have done a good job of containing the pandemic as well. Until vaccines are rolled out, others will struggle to keep up with the Chinese feat.

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However, key resilience in China masked an unbalanced recovery. Back in February, when the government began cautiously loosening its lockdown, it focused on reopening factories and launching infrastructure projects. It correctly saw that maintaining strict health protocols in factories and construction sites, which can be managed as semi-closed environments, would be easier than shopping malls or schools. Moreover, China’s meager provisions for unemployment insurance have meant that millions of people who find themselves unemployed have had to cut back on spending. Early in its recovery, the Chinese economy was driven by factory production and investment. Capital Formation – Class In Gross domestic product The accounting that includes these endeavors – contributed five percentage points to growth in the second quarter, while consumption subtracted more than two percentage points. At that time, the growth rate in China was 3.2% year on year.

The recent data reflects a slightly more balanced recovery (see graph). The contribution to growth in the third quarter of capital formation fell to less than three percentage points, in line with the pre-pandemic benchmark, as infrastructure spending declined. Consumption added nearly 2 percentage points, which was lower than pre-pandemic highs but a major improvement – easily noticeable in the crowds returning to tourist spots, restaurants and stores. Trade was the best solution. China’s share of global merchandise exports rose to a record high during the epidemic. It has received a boost from being the first manufacturing power to resume operations, as well as being the world’s largest producer of protective equipment, from masks to surgical gowns.

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When Chinese data looks so rosy, it is natural to wonder if it is believable. In this case, there is a group of nonGross domestic product Indicators, including other countries’ exports to China, lend credence to the picture of a strong recovery. The biggest concern is whether the recovery has come at the expense of debt restraint efforts. An initial severe economic slowdown that was followed by a government-directed boom in bank lending will push China’s debt to-Gross domestic product The ratio is around 275% this year, an increase of 25 percentage points. This will be the largest annual increase since 2009 during the global financial crisis.

However, China is far from alone. Governments around the world have raised huge tabs to minimize the economic fallout from the pandemic. With its growth back on track, China has an opportunity to tighten the faucets again. s&s, A credit rating agency, indicates that the country’s real lending rates (i.e. adjusted for inflation) have recently risen to their highest level in five years, which is a disincentive to investment. If it succeeds, China will confine irrational exuberance to gatherings.

This article appeared in the China section of the print edition titled “Big Spot”.

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