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When New Year’s rockets blast off in China on Thursday, exactly a year ago since the World Health Organization received confirmation through official channels that there was an outbreak of an unknown disease in the city of Wuhan, which has one million inhabitants. The rumors had been going on for several weeks.
There have been almost no local outbreaks of the coronavirus in China since last spring. The few sporadic cases of infection have been quickly eliminated with massive testing of all inhabitants of a few million cities to prevent spread.
During 2020, more than 81 million people have been confirmed to be infected with the coronavirus and the death of almost 1.8 million people has been confirmed. China is almost nonexistent on the infection map with fewer than 100,000 confirmed cases, as is Bahrain, which has 1.6 million people.
The winner is China
The Chinese economy has returned to the same level it was before the eruption, according to Capital Economics. The analytics company announces China as the “winner for 2020,” in a year in which economic activity in the world economy will decline mainly since World War II.
“China has not been immune and is heading for the weakest growth since the Mao era. Against a gloomy backdrop, economic development has been exceptional in 2020,” the team led by senior economist Julian Evans-Pritchard writes.
China’s share of the world economy has never increased more than this year, according to the research company.
“But we would caution this not to be viewed as a trend going forward.” China’s economic structural weaknesses, demographics, rising debt burdens and declining returns on investment are currently being covered by stimuli, “writes Capital Economics.
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He sees parallels to what happened after the 2008 financial crisis, when money was lost and caused bubbles to build up in, among other things, the housing and equity markets.
“China’s rise at the time masked an underlying decline in trend growth, which only became apparent a few years later. We believe the same will happen this time,” writes Evans-Pritchard.
Unstable activity growth
3,300 Chinese business leaders who have participated in the recent China Beige Book quarterly survey believe that activity in the economy has not returned to what it was before the corona pandemic.
They believe it will be at least three months before turnover, earnings and employment return to 2019 level. Growth in luxury goods, food and clothing revenue is significantly weaker than in the third quarter.
“Companies in these subcategories report weaker margins and lower sales volumes,” according to the China Beige Book report, accessed by CNBC on Tuesday.
Sales of cars and furniture remain high, indicating that it is the upper middle class that explains the growth in consumption. There is hardly any growth in the catering and tourism sector. The export sector is booming, but imports have slowed.
New economic statistics show that the largest industrial companies increased their profits in November by more than 15 percent compared to the same month last year. Production growth was seven percent. The economic growth of 202 is expected to be between two and three percent.
In just three weeks, China will present economic statistics for 2020.
– Significant uncertainty
International financial institutions are in the process of adjusting the forecasts for 2021. A survey of 35 economists by the Japanese business newspaper Nihon Keizai Shimbun shows that there is consensus on economic growth of 8.2 percent next year for the Chinese economy.
This is the highest economic growth, measured in gross domestic product, since 2012.
ING Bank’s Chief China Economist Iris Pang believes Chinese consumers will continue to spend money as long as international travel restrictions continue for most of 2021.
Vaccination against the coronavirus in China and the rest of Asia will only start in the second half of the year and it may take a long time before the population is vaccinated. Conflicts with the United States and Australia, where China has imposed an import ban on major Australian exports, could lead to changes in trade.
– There is considerable uncertainty about coronary heart disease in the US and Europe. At the same time, China’s relations with other countries have caused increasing tensions. This could spoil China’s strong export growth, domestic production and investor confidence, Moody’s Analytics economist Xu Xiaochun tells the business newspaper.
Predictable American politics
The new American administration, led by Joe Biden, is likely to lead to further changes in American foreign policy. This could lead to a more predictable American policy, which China prefers.
– A more inclusive foreign policy may mean that the United States cooperates with its traditional allies to implement measures against China, says senior economist Francoise Huang in Euler Hermes to Nihon Keizai Shimbun.(Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our cases via a link, which leads directly to our pages. Copying or other use of all or part of the content may only be done with written permission or as permitted by law. For more terms, see here.
