From being the first country where the Covid-19 virus was detected, China is poised to become the only major economy in the world to grow in 2020. China’s gross domestic product (GDP) expanded 4.9% in the July-September quarter. , according to statistics published by the country’s National Statistics Office. Given its position as the world’s second-largest economy, China’s V-shaped recovery has raised hopes for a rare growth cushion around the world.
China’s V-shaped recovery
China’s economic recovery after the impact of the pandemic has followed a V-shaped recovery pattern. Its GDP contracted by 5.3% in the January-March quarter, grew by 3.2% in April-June and improved even more in July-September. While the September quarter figure is less than the 5.2% estimated by a Reuters analyst survey, China will become the only major country to escape a GDP contraction this year, said Eswar Prasad, an economist at the university. Cornell, to the Financial Times. . The International Monetary Fund (IMF) predicted China’s GDP to grow 1.9% this year in its World Economic Outlook released earlier this month.
The pandemic has revived manufacturing in China
China’s GDP recovery has been “fueled by a state-backed industrial boom,” the Financial Times said. Industrial production grew 6.9% in the September quarter, it reported. A look at China’s Purchasing Managers Index (PMI) shows that the Covid-19 pandemic could have given the industry a boost. The manufacturing PMI was below 50 from May 2019 to October 2019, 50.2 in November and December 2019, and 50 in January 2020 before collapsing to 35.7 in February. A PMI value above 50 means expansion of economic activity. The post-February figures are actually better than last year.
Containing infections is key to economic recovery
China’s growth figures also underscore the importance of containing the spread of the Covid-19 pandemic for an economic recovery. China not only quickly contained the spread of the virus, but has so far been able to prevent a second wave of infections, unlike other major countries. The United States, which is the world’s largest economy, is starting to see a third wave, while countries like India, despite a dip in the first wave, continue to see a very high number of infections.
Will China’s resilience fuel protectionist policies?
China’s rise as an economic superpower was fueled by an export boom. This mercantilist trajectory, especially after the financial crisis of 2008, fueled a protectionist reaction in the world, especially in advanced countries such as the United States. The world’s two largest economies have been embroiled in a trade war in recent years. At a time when the rest of the world faces an economic downturn, China’s economic and trade performance (Chinese exports increased 10.2% in the July-September quarter) could create strong incentives for world leaders to turn to measures protectionists. The growing geopolitical confrontation of countries like Japan and India with China, and the attempts of President Donald Trump to use anti-China rhetoric in the upcoming US elections, could increase this possibility. Any development of this type could mitigate the tailwinds that the Chinese economic recovery can generate for the world economy.
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