Chinese economy emerges stronger from unprecedented virus test
China Economic Net
Beijing: China’s economy, the first jolted by COVID-19, has bounced back from epidemic fallout with resilience on effective virus control and targeted stimuli, as a pandemic depression continues to threaten the world.
With GDP growth reaching 3.2 percent and 4.9 percent in the second and third quarters, the world’s second-largest economy completed the upward leg of a V-shaped recovery from virus-induced lockdowns that sent it into a rare 6.8-percent contraction in the first quarter.
In its latest Economic Outlook report, the Organization for Economic Co-operation and Development predicted that China will be the only major economy to record positive performance in 2020 with 1.8-percent growth.
By the end of 2021, global gross domestic product is projected to reach the pre-pandemic level, with China expected to account for over a third of world economic expansion, according to the report released this month.
As a more encouraging sign, China’s exports jumped 21.1 percent year on year in November in U.S. dollar terms, the fastest growth since February 2018, thanks to strong demand for medical goods and electronics.
The brisk recovery has not been easy to come by. Refraining from hastily resorting to massive stimulus measures, China adopted a clear and consistent approach: containing the virus first with stringent public health measures and then rolling out monetary and fiscal policies to revive economic activities.
China’s “post-COVID rebound is gathering momentum amid a developed world that remains on shaky ground,” Stephen Roach, a senior fellow at Yale University, said in an article published by Singapore-based news network Channel NewsAsia.
Roach attributed China’s quick economic recovery to the deployment of a “COVID-first strategy” where the country “insulates its citizens from a virulent pathogenic contagion with public health measures” first and then “makes judicious use of monetary and fiscal policy to reinforce the post-lockdown snapback.”
This is in sharp contrast with some developed countries where debates focused on using monetary and fiscal policies as frontline countermeasures, rather than taking public health measures to contain the virus in the first place, according to Roach.
Indeed, China set virus containment as a top policy priority at the beginning of the outbreak, concentrating medical resources and exercising strong epidemic control despite massive economic costs.
Factories were shut down, schools were closed and many contact-based services such as entertainment and travel were either fully stopped or shifted online to contain the spread of the disease. Masking, temperature monitoring and health QR code scanning have become new norms in the COVID-19 era in China.
When it comes to reopening the economy, China took a targeted and agile approach. Differentiated policies were adopted for economic and social order restoration in different regions, with areas with low-risk of COVID-19 encouraged to return to normalcy first.
Meanwhile, China seemed to be able to perform a delicate balancing act between virus containment and economic recovery thanks to improved testing capacity and tracing.
The country’s fast recovery rests partly with the extraordinary macroeconomic policy mix of raising the deficit, tax relief, cuts in lending rates and banks’ reserve requirements.
“Unlike its European and U.S. counterparts, China stayed away from using a deluge of stimulus policies but implemented more targeted counter-cyclical adjustments,” said Xu Hongcai, deputy director of Economic Policy Commission of the China Association of Policy Science.
Compared with the 4-trillion-yuan (about 612 billion U.S. dollars) stimulus package China adopted to cope with the 2008 financial crisis, this year’s measures were “gentle,” said Zhang Yansheng, chief researcher of the China Center for International Economic Exchanges.