The world was struck blind due to the outbreak of the novel Coronavirus. The world economies have taken a hit while only now, in October, have they started reviving.
Almost all G20 countries have experienced “three declines” (economic growth, per capita income, and trade growth) and “three increases” (unemployment rate, fiscal deficit rate, and inflation rate), writes Hu Angang, Economics professor at Tsinghua University, for valdaiclub.com
Most global economies have taken an eventual turn for the worst, but one would like to sit back and observe the economy of the country from where the virus had broken out.
The second-largest economy in the world saw a deep slump. It was in the first quarter, Q1 of 2020 that the country’s GDP saw a contraction of 6.8%, the worst decline since 1992, depicting the severe damage of the virus. That came as a blow since there was a growth of 6% in the last few months of 2019. The enforcing of non – essential business activity entailed a demand shock with the domestic consumption lessening marginally. The industrial sector dropped by 9.6%. The service sector saw a decline of 5.2%. Furthermore, the primary sector went down by 3.2 %. It is the weakest report known on record.
In the second quarter, Q2 of 2020 saw an expansion of 3.2 %. Most countries feared or were already in a double-digit contraction. However, China had a comparatively good increase of GDP due to bolstered policies of the government and resumption of work due to control of the pandemic.
Stringent lockdowns, massive testing, and giving its citizens experimental vaccines helped their case. A corresponding help was that there was fiscal stimulus involved. There were many strategies used for this purpose including 1 trillion yuan of special treasury bonds and tax breaks. China’s central bank known as the People’s Bank of China (PBOC) injected hundreds of billions as monetary easing. It also reduced the amount of cash banks were required to keep in reserve in April, which freed up capital for the economy.
It did not stop there. China’s GDP still shot up in the third quarter credits going to the export growth of medical equipment by 46% and laptops by 9% and the surge in demand. In complete contrast to most of the countries in the world, the people of China are out and about. It is interesting to note that in the third quarter, the GDP saw a rise of 4.9%.
While the rise painted a happy picture for China, it is essential to note that global economies have been growth-disabled due to the virus. The country did have its worst historic slump, with a shrink for the first time in decades. It also scrapped its growth target for the first time in years. The retail sales have seen a deeper decline and trying to get people to spend their money remained an issue.
It is extremely impressive to know that their economy is on the path to recovery. It is the only country in the G20 countries that is seeing any kind of expansion and according to International Monetary Fund, the only major economy expanding.
Is China’s road to recovery setting an example for the rest of the countries? Or with the injection of billions by the central bank which would lead to eventual national debt, setting a precaution for the countries?
Written by – Annapurna Pilutla.
Statistical and Literature References
- Coronavirus: Chinese economy bounces back into growth. (2020). Retrieved 1 November 2020, from- BBC
- China GDP Growth Rate | 2010-2020 Data | 2021-2022 Forecast | Calendar | Historical. (2020). Retrieved 1 November 2020, from-TradingEconomics
- China unveils US$500 billion virus stimulus but stops short of going all-in. (2020). Retrieved 1 November 2020
Image sources:
- China’s National Bureau of Statistics
- Global Times
- Global Times
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