October 19, 2020
04:56
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Now that the pandemic’s ‘Ground Zero’ has the local spread of the virus under control, domestic consumption in China is also recovering.
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The Chinese economy, the second largest in the world, has digested the pandemic. That is what the youngest learns report of the Chinese Bureau of Statistics. In the third quarter, Beijing estimates the growth of the economy at 4.9 percent. That is an acceleration from 3.2 percent in the spring. In the winter there was still a contraction of 6.8 percent. Then China was the first country in the world to struggle with the corona virus and the metropolis of Wuhan was locked.
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After a hesitant initial response China seems to have managed the domestic spread of Covid-19 can be virtually reduced to zero. China does this by carefully tracing the entire population via telephones, week-long lockdowns of neighborhoods where the virus emerges and massive tests on small outbreaks. For example, the entire metropolis of Qingdao is being tested, now it is in the port city six local infections have surfaced.
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The result is an economic recovery in a V-shape (see graph). In the first nine months of 2020, the Chinese economy will show growth again compared to 2019. This is in stark contrast to the United States and Europe. There was a ‘technical’ recovery there this summer as the economy reopened, but it will be some time before the damage done this spring is repaired. All the more so as both Europe and the United States are currently facing a revival of Covid-19.
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While a large part of the Western world is struggling with a ’90 percent economy ‘, in which entertainment and hospitality remain largely closed off, domestic consumption in China is reviving. In September, retail sales were 3.3 percent above the level of a year earlier, while in March there was a record 15.8 percent contraction.
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The many domestic journeys create jobs for the low-skilled, which is an additional support for domestic consumption
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‘There has been a lot of travel between the Chinese provinces,’ notes ING economist Iris Pang. ‘Those many domestic journeys create jobs for the low-skilled, which is an additional support for domestic consumption.’
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The growth rate of 4.9 percent over the summer was slightly less than the 5.3 percent that the economists surveyed by information supplier Bloomberg expected, but that does not necessarily have to be negative. ‘The reason for this slightly slower growth is a strong increase in imports, a factor that weighs on the growth figure. But a surge in imports is actually positive, as it points to a strong underlying increase in demand, ”said Peiqian Liu, economist at NatWest Markets in Singapore.
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