Hello again,
The world changed dramatically in January 2020 with the realisation of the seriousness of the coronavirus outbreak and its impact on lives worldwide. The virus didn't recognise national boundaries and wreaked havoc on the entire global economy. But Beijing's timely and robust steps to contain the outbreak, coupled with massive government financial support, allowed the Chinese economy to lead the global recovery from the damage caused by the pandemic. Going forward, though, the outlook for the economy now remains uncertain, given the resurgence of the virus and a series of other economic challenges.
Rising from the ashes: China stages rapid recovery from coronavirus
In early 2020, there was considerable discussion about the continuing slowdown in the Chinese economy during 2019 and whether growth would be fast enough in 2020 to achieve the Chinese Communist Party's goal of doubling the size of the economy over the past decade.
On January 18, China announced that its economy had grown 6.1 per cent in 2019 (since revised down to 6.0 per cent), the lowest growth rate since 1990, when political turmoil depressed the economy. Growth in the fourth quarter of 2019 was 6.0 per cent, tied for the lowest quarterly growth rate since records began.
But only a few days later, the economic outlook changed dramatically, making 2019 look like a banner year.
Throughout January, there were an increasing number of stories and rumours at that point about a mysterious "pneumonia" in the central Chinese city of Wuhan.
On January 23, China locked down Wuhan, a city of 11 million, to contain the spread of the highly contagious and deadly "novel coronavirus," as it was then called (it was not until March that the World Health Organization declared a global pandemic).
The shuttering of Wuhan lasted 76 days, and along with the closures of a dozen other cities in Hubei province, the measures eventually affected 60 million people.
The practice was labelled draconian at the time, but it worked. Studies found that the lockdowns helped reduce the spread of the disease globally. While some countries adopted lockdowns of their own, experts said they would not work everywhere.
China’s lockdowns pummelled the domestic demand and production in the short run, with the economy contracting by 6.8 per cent in the first quarter, the first economic reversal since 1976 at the end of the Cultural Revolution. The central government sprang into action to offset the damage caused by the pandemic, relying on its old recovery playbook that focused on major infrastructure spending and a loose monetary policy to boost growth. Beijing also abandoned its GDP growth target for the year.
Even as the report on first quarter GDP was released in mid-April, the economy was already starting to show signs of a comeback, as some had predicted.
GDP grew by 3.2 per cent in the second quarter on the back of stronger industrial production supported by strong government spending, becoming the first major economy to rebound from the pandemic. While some economists expressed reservations about the reported strength of the rebound, those doubts were put to rest in the third quarter, when growth continued to accelerate.
With other major industrial nations struggling to contain the virus and resume economic growth, Chinese exports surged, as it provided not only the masks and protective gear needed to combat the pandemic but also the consumer electronics like computers and TVs in high demand because of the large number of employees around the world working from home. China's role as "factory of the world" was reinforced, casting aside worries about economic decoupling that were prevalent only a few months earlier.
China is expected to be the only major economy in the world to post growth in 2020, with the fourth quarter growth rate in line with that of a year earlier, before the pandemic. Beijing trumpeted both its control of the virus and its rapid economic recovery as vindication for its centrally controlled economic model.
Coupled with the contraction in the US economy in 2020, China's rebound meant its economy was that much closer to becoming the largest in the world.
But many challenges remain.
Overcoming the US restrictions on technology has become a major policy priority for 2021. The recovery remains unbalanced, with consumer spending, especially on services, remaining weak due to the lingering effects of the economy. And unemployment remains a problem despite the decline in the official jobless rate, with an increasing number of university graduates having to take menial jobs, such as couriers, when they can find jobs at all. And a record number of new graduates this year will be a further challenge to Beijing policymakers.
And a year after the initial coronavirus outbreak, authorities locked down cities in northern China this January, raising questions about the outlook for growth in the first quarter. Train travel during the Lunar New Year in February was down 70 per cent from a year earlier, raising concerns about a sharp drop in consumer spending during the holiday season, when urban workers traditionally travel to their hometowns and spend large amounts on travel, gifts and banquets.
Chinese consumers still spent around 821 billion yuan (US$127 billion) on shopping and dining during this year’s Spring Festival holiday, an increase from 2020 but still below the amount in 2019, which was over 1 trillion yuan.
But the latest virus outbreak has already hit the economy. In January, the International Monetary Fund downgraded slightly its forecast for Chinese growth this year to 7.9 per cent, but it is still expected to lead the world in 2021.
- South China Morning Post, SCMP -
Hello again,
The world changed dramatically in January 2020 with the realisation of the seriousness of the coronavirus outbreak and its impact on lives worldwide. The virus didn't recognise national boundaries and wreaked havoc on the entire global economy. But Beijing's timely and robust steps to contain the outbreak, coupled with massive government financial support, allowed the Chinese economy to lead the global recovery from the damage caused by the pandemic. Going forward, though, the outlook for the economy now remains uncertain, given the resurgence of the virus and a series of other economic challenges.
Rising from the ashes: China stages rapid recovery from coronavirus
In early 2020, there was considerable discussion about the continuing slowdown in the Chinese economy during 2019 and whether growth would be fast enough in 2020 to achieve the Chinese Communist Party's goal of doubling the size of the economy over the past decade.
On January 18, China announced that its economy had grown 6.1 per cent in 2019 (since revised down to 6.0 per cent), the lowest growth rate since 1990, when political turmoil depressed the economy. Growth in the fourth quarter of 2019 was 6.0 per cent, tied for the lowest quarterly growth rate since records began.
But only a few days later, the economic outlook changed dramatically, making 2019 look like a banner year.
Throughout January, there were an increasing number of stories and rumours at that point about a mysterious "pneumonia" in the central Chinese city of Wuhan.
On January 23, China locked down Wuhan, a city of 11 million, to contain the spread of the highly contagious and deadly "novel coronavirus," as it was then called (it was not until March that the World Health Organization declared a global pandemic).
The shuttering of Wuhan lasted 76 days, and along with the closures of a dozen other cities in Hubei province, the measures eventually affected 60 million people.
The practice was labelled draconian at the time, but it worked. Studies found that the lockdowns helped reduce the spread of the disease globally. While some countries adopted lockdowns of their own, experts said they would not work everywhere.
China’s lockdowns pummelled the domestic demand and production in the short run, with the economy contracting by 6.8 per cent in the first quarter, the first economic reversal since 1976 at the end of the Cultural Revolution. The central government sprang into action to offset the damage caused by the pandemic, relying on its old recovery playbook that focused on major infrastructure spending and a loose monetary policy to boost growth. Beijing also abandoned its GDP growth target for the year.
Even as the report on first quarter GDP was released in mid-April, the economy was already starting to show signs of a comeback, as some had predicted.
GDP grew by 3.2 per cent in the second quarter on the back of stronger industrial production supported by strong government spending, becoming the first major economy to rebound from the pandemic. While some economists expressed reservations about the reported strength of the rebound, those doubts were put to rest in the third quarter, when growth continued to accelerate.
With other major industrial nations struggling to contain the virus and resume economic growth, Chinese exports surged, as it provided not only the masks and protective gear needed to combat the pandemic but also the consumer electronics like computers and TVs in high demand because of the large number of employees around the world working from home. China's role as "factory of the world" was reinforced, casting aside worries about economic decoupling that were prevalent only a few months earlier.
China is expected to be the only major economy in the world to post growth in 2020, with the fourth quarter growth rate in line with that of a year earlier, before the pandemic. Beijing trumpeted both its control of the virus and its rapid economic recovery as vindication for its centrally controlled economic model.
Coupled with the contraction in the US economy in 2020, China's rebound meant its economy was that much closer to becoming the largest in the world.
But many challenges remain.
Overcoming the US restrictions on technology has become a major policy priority for 2021. The recovery remains unbalanced, with consumer spending, especially on services, remaining weak due to the lingering effects of the economy. And unemployment remains a problem despite the decline in the official jobless rate, with an increasing number of university graduates having to take menial jobs, such as couriers, when they can find jobs at all. And a record number of new graduates this year will be a further challenge to Beijing policymakers.
And a year after the initial coronavirus outbreak, authorities locked down cities in northern China this January, raising questions about the outlook for growth in the first quarter. Train travel during the Lunar New Year in February was down 70 per cent from a year earlier, raising concerns about a sharp drop in consumer spending during the holiday season, when urban workers traditionally travel to their hometowns and spend large amounts on travel, gifts and banquets.
Chinese consumers still spent around 821 billion yuan (US$127 billion) on shopping and dining during this year’s Spring Festival holiday, an increase from 2020 but still below the amount in 2019, which was over 1 trillion yuan.
But the latest virus outbreak has already hit the economy. In January, the International Monetary Fund downgraded slightly its forecast for Chinese growth this year to 7.9 per cent, but it is still expected to lead the world in 2021.
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20 February 2021 |
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Hello again,
The world changed dramatically in January 2020 with the realisation of the seriousness of the coronavirus outbreak and its impact on lives worldwide. The virus didn't recognise national boundaries and wreaked havoc on the entire global economy. But Beijing's timely and robust steps to contain the outbreak, coupled with massive government financial support, allowed the Chinese economy to lead the global recovery from the damage caused by the pandemic. Going forward, though, the outlook for the economy now remains uncertain, given the resurgence of the virus and a series of other economic challenges.
Rising from the ashes: China stages rapid recovery from coronavirus
In early 2020, there was considerable discussion about the continuing slowdown in the Chinese economy during 2019 and whether growth would be fast enough in 2020 to achieve the Chinese Communist Party's goal of doubling the size of the economy over the past decade.
On January 18, China announced that its economy had grown 6.1 per cent in 2019 (since revised down to 6.0 per cent), the lowest growth rate since 1990, when political turmoil depressed the economy. Growth in the fourth quarter of 2019 was 6.0 per cent, tied for the lowest quarterly growth rate since records began.
But only a few days later, the economic outlook changed dramatically, making 2019 look like a banner year.
Throughout January, there were an increasing number of stories and rumours at that point about a mysterious "pneumonia" in the central Chinese city of Wuhan.
On January 23, China locked down Wuhan, a city of 11 million, to contain the spread of the highly contagious and deadly "novel coronavirus," as it was then called (it was not until March that the World Health Organization declared a global pandemic).
The shuttering of Wuhan lasted 76 days, and along with the closures of a dozen other cities in Hubei province, the measures eventually affected 60 million people.
The practice was labelled draconian at the time, but it worked. Studies found that the lockdowns helped reduce the spread of the disease globally. While some countries adopted lockdowns of their own, experts said they would not work everywhere.
China’s lockdowns pummelled the domestic demand and production in the short run, with the economy contracting by 6.8 per cent in the first quarter, the first economic reversal since 1976 at the end of the Cultural Revolution. The central government sprang into action to offset the damage caused by the pandemic, relying on its old recovery playbook that focused on major infrastructure spending and a loose monetary policy to boost growth. Beijing also abandoned its GDP growth target for the year.
Even as the report on first quarter GDP was released in mid-April, the economy was already starting to show signs of a comeback, as some had predicted.
GDP grew by 3.2 per cent in the second quarter on the back of stronger industrial production supported by strong government spending, becoming the first major economy to rebound from the pandemic. While some economists expressed reservations about the reported strength of the rebound, those doubts were put to rest in the third quarter, when growth continued to accelerate.
With other major industrial nations struggling to contain the virus and resume economic growth, Chinese exports surged, as it provided not only the masks and protective gear needed to combat the pandemic but also the consumer electronics like computers and TVs in high demand because of the large number of employees around the world working from home. China's role as "factory of the world" was reinforced, casting aside worries about economic decoupling that were prevalent only a few months earlier.
China is expected to be the only major economy in the world to post growth in 2020, with the fourth quarter growth rate in line with that of a year earlier, before the pandemic. Beijing trumpeted both its control of the virus and its rapid economic recovery as vindication for its centrally controlled economic model.
Coupled with the contraction in the US economy in 2020, China's rebound meant its economy was that much closer to becoming the largest in the world.
But many challenges remain.
Overcoming the US restrictions on technology has become a major policy priority for 2021. The recovery remains unbalanced, with consumer spending, especially on services, remaining weak due to the lingering effects of the economy. And unemployment remains a problem despite the decline in the official jobless rate, with an increasing number of university graduates having to take menial jobs, such as couriers, when they can find jobs at all. And a record number of new graduates this year will be a further challenge to Beijing policymakers.
And a year after the initial coronavirus outbreak, authorities locked down cities in northern China this January, raising questions about the outlook for growth in the first quarter. Train travel during the Lunar New Year in February was down 70 per cent from a year earlier, raising concerns about a sharp drop in consumer spending during the holiday season, when urban workers traditionally travel to their hometowns and spend large amounts on travel, gifts and banquets.
Chinese consumers still spent around 821 billion yuan (US$127 billion) on shopping and dining during this year’s Spring Festival holiday, an increase from 2020 but still below the amount in 2019, which was over 1 trillion yuan.
But the latest virus outbreak has already hit the economy. In January, the International Monetary Fund downgraded slightly its forecast for Chinese growth this year to 7.9 per cent, but it is still expected to lead the world in 2021.
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How coronavirus turned China’s economic expectations on their head
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Around 12 months ago the debate centred on whether the country would achieve 6 per cent growth, a target that was rapidly lowered as the coronavirus took hold | | | • | But the country has bounced back in the latter half of the year, in stark contrast to the US and other major economies
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At the end of 2019, economic debate in China centred on whether the country should aim for 6 per cent growth the following year – a conversation that was rapidly turned on its head by the coronavirus. As the situation steadily worsened, first in China and then across the globe, growth forecasts were slashed as the death toll mounted. Read more
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Beijing must upgrade policy toolkit to boost consumer spending, adviser says
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Retail sales, a key indicator of consumer spending in China, contracted by 3.9 per cent last year, and experts say reform measures are needed to reverse the trend | | | • | Analysts have expressed concerns with the lingering weak recovery in domestic consumption, which is lagging behind a strong rebound in industrial production, investment and trade
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Even though the Chinese economy continues its rapid recovery from the coronavirus shock, Beijing’s traditional policy prescriptions are too outdated to be successful in igniting a strong improvement in subdued consumer spending, a prominent adviser to the central government has warned. More policy efforts to redistribute income and improve public welfare are needed, as well as more direct support for individual consumers, said Wang Yiming, vice-chairman of the China Centre for International Economic Exchanges and former deputy head of the Development Research Centre of the State Council. Wang personally advised Chinese President Xi Jinping on policy several times last year. Read more
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China’s coronavirus recovery lays bare regional economic disparity
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China’s recovery from the coronavirus remains uneven in a number of respects, including between provinces | | | • | Beijing must address the gulf between prosperous coastal regions and relatively undeveloped west, experts say
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China’s uneven regional economic development has been turbocharged by the coronavirus pandemic, despite a broad-based national recovery, representing a long-term challenge for the nation’s leaders. The economy has bounced back from draconian lockdowns early in the year, led by industrial production and infrastructure investment, with consumer spending slowly catching up. Read more
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China must maintain stimulus to ensure economic rebound: Beijing adviser
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Prominent economist Liu Shangxi says China should not scale back the economic stimulus it rolled out to combat the coronavirus | | | • | Beijing must also address ballooning local government debt and should consult incoming Biden administration to reduce tensions, Liu says
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China should maintain its monetary and fiscal stimulus to consolidate its post-coronavirus economic recovery and counter a highly uncertain global environment, a prominent government adviser has said. “It’s inappropriate to exit macroeconomic policy soon. Otherwise, it could risk falling short of success,” Liu Shangxi, head of the Chinese Academy of Fiscal Sciences, an affiliate of the Ministry of Finance, said in an exclusive interview with the South China Morning Post. Read more
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To keep track of the latest global news developments, follow our daily coverage on our website, or focus on stories about China’s economy here.
In our next issue, we’ll look at the evolving situation in Myanmar and global reaction to the military coup.
We welcome your feedback. Email me at globalimpact@scmp.com or tweet me at @scmpeconomy. Plus, be sure to check out our Economy newsfeed for the latest news and analysis.
All the best,
John Carter
Senior Editor, Political Economy
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John Carter
Senior Editor, Political Economy
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This newsletter is created and catered for the global news reader. Each issue will feature a news story originating from China that carries a significant macro impact on the rest of the world.
We hope to share with you a broader perspective on the emerging topics shaping our world and that we feel are revolutionising the way we understand China.
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