Chinese economy: 4 keys to the remarkable growth of the Asian country after the closures due to the pandemic | The NY Journal


The latest data from the Chinese economy show that the Asian giant leads the world recovery after the collapse of the pandemic

In the country where Covid-19 emerged, the economy is stronger than ever this year.

The government of China reported on Monday a growth ofl 4.9% between July and September, compared to the same period of the previous year.

Although this is less than the 5.2% expected by analysts, that number puts the second largest economy in the world at the forefront of the recuperation in terms of the Gross Domestic Product (GDP).

At the beginning of 2020, when the pandemic began, growth fell markedly and ended the first quarter with a contraction of 6.8%.

The closures of factories and industrial plants across the country were a huge blow to the Asian giant, which for first once had negative quarterly numbers since 1992.

Over the past two decades, the nation had experienced an average economic growth rate of about 9%, although the pace gradually slowed.

A steel plant in China
Industrial production grew by 5.8%, an important reactivation of the sector after the pandemic. Getty Images

“China’s economy continues to grow at rates that are currently unimaginable for other countries affected by covid-19. The draconian lockdown measures to control the virus, combined with some government stimulus, seemed to have worked well, “says Robin Brant, BBC China correspondent.

Four keys stand out on how the recovery came this year.

1. The power of foreign trade

Key economic growth figures released suggest that China’s recovery is accelerating, though experts often question the accuracy of their data.

“I don’t think the number shown is wrong,” says Iris Pang, chief economist for China at ING Hong Kong. “The employment creation in China it is quite stable, which generates more consumption ”.

But one of the key figures September show that there is a strong recovery in exports of 9.9%, while imports increased 13.2% compared to the same month of 2019.

“It remains on the road to recovery driven by a rebound in exports,” says Yoshikiyo Shimamine, chief economist at the Dai-Ichi Life Research Institute in Tokyo.

“But we cannot say that it has shaken by full the drag caused by the coronavirus ”.

Heavy vehicles at a plant in China
Factories stopped by the pandemic have restarted their activities for several weeks, one of the pillars of the recovery. Getty Images

While the covid-19 pandemic has hampered growth targets this year, experts note that the trade war between China and the United States has not been resolved. So the pressure continues from that flank.

“Although the 4.9% growth is slightly below some forecasts, industrial production, a good barometer of state-controlled activity, exceeded expectations,” says Brant.

2. Cash injections

Earlier this year, China’s central bank stepped up support for growth and jobs after widespread travel restrictions stifled economic activity.

But more recently it has lagged in further easing.

The Chinese government also injected resources into the economy through a fiscal stimulus package.

“An important source of financing will come from the ‘special bonds’ of the local government”, which was US $ 561,000 million, indicated the rating agency Fitch, which says that this triples the funds to infrastructure projects.

“This pattern of funding will eventually translate into spending,” he adds.

A construction worker from China
The government has allocated the equivalent of 3.6% of its GDP to stimulate the economy through a fiscal aid package. Reuters

Prime Minister Li Keqiang warned in early October that China needs to make strenuous efforts to achieve its annual economic goals.

“The rulers of the Communist Party of China wanted to see an increase in the supply of products, but retail sales were slower than expectedExplains Brant.

3. Return services

In the April-June period, the services sector already showed a sustained recovery that has been consolidated between July and September.

The tertiary sector saw a growth of 4.3%, according to official data, supported mainly by the companies of software and information, telecommunications, transportation, as well as financial services (the latter with an increase of 7%).

Chinese in a Hainan shopping mall
Retail sales are not yet the best for the full restoration of the Chinese economy. Reuters

Analysts note that China, being the first country to enter the pandemic, also recovered from it long before western economies, which are seeing new waves of infections and their consequent restrictions on economic activities.

In China, “the recovery of the very important service sector” is evident, says the BBC correspondent.

4. The power of tourism

China’s economy is also on track to get a boost from “Golden Week,” an annual holiday in October that has seen millions of Chinese going on trips.

Since international outlets are severely restricted, millions of Chinese have been traveling and spending in the country, so this has been a boost for recovery.

According to data from its Ministry of Culture and Tourism, there was a movement of 637 million travelers in China during the eight-day vacation that generated revenues of the equivalent of US $ 69.6 billion.

A Chinese family takes a photo in Beijing
The “Golden Week” has led millions of Chinese to travel around the country in the face of international restrictions. EPA

Duty-free sales in Hainan province doubled widely from last year – 150% based on data from local customs.

“Tourists and domestic travelers have probably helped the recovery continue, by spending their money at home as global restrictions mean that they are still they cannot go abroadSays Brant.

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