“Even with the reopening, China’s recovery is very slow,” says the consultant – Época Negócios

After a 6.8% drop in GDP in the first quarter of this year, compared to the same period in 2019, it may take a long time for China to recover, as do most economies after the global pandemic. covid-19, according to the American Arthur Kroeber, founder of the consulting firm Gavekal Dragonomics, specialized in China.

The evidence for this is that today, six weeks after starting to reopen the economy, China has only 40% of small businesses operating. “China is running at 80% to 90% of its normal activity level. Returning to 100% may take months. The message is that even if the economy begins to reopen, the recovery is very slow,” he says.

The following are excerpts from the interview.

China’s GDP was in line with what Mr. expected?
Yes. The question now is how fast will it improve. The main questions are whether China will be able to regain the small and medium-sized business sector and how strong the drop in exports will be. Chinese exports to Europe and the United States can fall between 20% and 40%. Today, China is running between 80% and 90% of its normal activity level.

This doesn’t sound so bad, but there is data to suggest that only 40% of small businesses have returned. China stopped almost all activities three months ago. After six weeks, it started reopening a few things and, six weeks later, it is still running below normal level. Returning to 100% may take several months. The basic message is that even if the economy begins to reopen, the recovery is very slow.

What changes should occur in commercial and international organizations after the crisis?
There is an argument that the crisis proves that globalization is a problem, that more needs to be done at home. The other argument, as I agree, is that global cooperation is needed and that international institutions help manage a pandemic.

In this sense, supply chains that are not fragmented are needed, because if each country has its own network, some countries will have a lot, others will have little, and getting things in some places will be difficult and expensive. There should be a great debate on this from now on.

Does the announcement that the United States will no longer collaborate with WHO funds no longer indicate that we are moving toward less collaboration?
What I see in the United States is a government controlled by economic nationalism along with a national security lobby. But against that, it has a strong business community that invests in globalization. There will be a discussion between these groups, but we cannot predict what will happen.

Can we predict what the relationship between the United States and China will be like after all this?
Yes, because it is getting worse and will get even worse. There is a fight to control the narrative. The United States is busy creating narratives that the blame for the epidemic is China or the WTO, and that is just a speech to divert attention from the incompetence of the American response.

In China, the government says it did everything for the citizens and it’s wonderful, which underestimates the mistakes it made before responding to the virus. I think America’s hard-line vision is to take this opportunity to reinforce the idea that China is unreliable.

And in China, they think: Okay, that emphasizes that we don’t have to focus on cooperating with the United States. If you look at the presidential campaign, Trump wants Joe Biden to look weaker when it comes to China. The role China will play in the campaign is that of a negative force. Therefore, the relationship between countries will worsen. This is troubling, because if you want greater global coordination, the United States and China must lead the way.

Does that change if Trump loses the election?
If Biden wins, there should be no emphasis on the trade war and tariffs, but I don’t know if it could change the situation. The relationship may stop getting worse, but the improvement will be modest.

Analysts believe China could become a world leader after the crisis, as it responded better to the virus. Do you agree
No. In the 2008 financial crisis, many people predicted a decline for the United States and that, in ten years, China would be the world leader. Ten years later, the United States was still a bigger and much more powerful economy than China. China had gains, but they were moderate. Something similar should happen now. Initially, China seems to be doing very well, it has managed to control things, while the United States seems to be in chaos. The American system is dynamic and robust. After a confusing period, he discovers how to get things back on track, while China is fundamentally more rigid. But, of course, China must gain a little more prestige and credibility after demonstrating that its system is efficient. It is a gain for China, but it does not change the power relationship between the two countries.

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