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Home / Business / Covid-19-controlled China’s economy is ahead

Covid-19-controlled China’s economy is ahead

BEIJING – As most countries around the world are still struggling with the coronavirus pandemic, China is once again demonstrating that a rapid economic recovery is possible when the virus is firmly under control.

China’s economy grew 4.9 percent in the quarter from July to September compared to the same months last year, the country’s National Bureau of Statistics said on Monday. High productivity is almost returning China to about the 6 percent growth rate it reported before the pandemic.

Many of the world’s largest economies rose rapidly from the depths of the recession last spring, when shutdowns led to a sharp drop in production. But China is the first to report growth that far exceeds what it was last year. The United States and other countries are also expected to see a surge in the third quarter, but they are still lagging behind or simply catching up to the pandemic level.

China’s lead could grow even more in the coming months. It now has almost no local transmission of the virus, while the United States and Europe are facing another accelerating wave of cases.

China’s strong economic expansion means it must dominate global growth, accounting for at least 30 percent of global economic growth this year and in the years to come, Justin Lin Yifu, a cabinet adviser and honorary dean of the National School of Development at Peking University, told a recent government conference in Beijing.

Chinese companies account for most of the world’s exports, producing consumer electronics, personal protective equipment and other goods in high demand during the pandemic. At the same time, China now buys more iron ore from Brazil, more corn and pork in the United States and more palm oil from Malaysia. This partially offset the decline in commodity prices last spring and mitigated the impact of the pandemic on some industries.

However, China’s recovery has helped the rest of the world less than in the past, as its imports have grown almost not as much as its exports. This model has created jobs in China, but has slowed growth in other regions.

China’s economic recovery has also depended for months on huge investments in highways, high-speed railways and other infrastructure. And in recent weeks, the country began to recover domestic consumption.

Wealthy people and people living in export-oriented coastal provinces were the first to start spending money again. But activities are now resuming even in places like Wuhan, the central Chinese city where the new coronavirus first emerged.

“You had to line up to get to many Wuhan restaurants, and for popular Wuhan restaurants on the Internet, the wait is two to three hours,” said Lei Yantsiu, a Wuhan resident in the early 1930s.

George Zhong, a resident of Chengdu, the capital of Sichuan province in western China, said he had traveled to three provinces in the past two months and was active in shopping when he was at home. “I spend no less than in previous years,” said Mr. Zhong.

China’s economic growth has deteriorated slightly over the past three months, according to economists, from 5.2 to 5.5 percent. But the results were still strong enough that stock markets in Shanghai, Shenzhen and Hong Kong rose at the start of trading on Monday.

The country’s expansion can also be seen in economic statistics only for September, which was also published on Monday. Last month’s retail sales rose 3.3 percent from a year ago, while industrial production rose 6.9 percent.

China’s growth resumption model may be effective, but may not be attractive to other countries.

Deciding to keep local transmission of the virus at or near zero, China has resorted to comprehensive population surveillance with mobile phones, weekly blockades of neighborhoods and cities, and costly mass trials in response to even the slightest outbreak.

China’s resurgence also has some weaknesses, including a surge in total debt this year of 15-25 percent of total economic output. Much of the additional debt is borrowing from local governments and state-owned enterprises to pay for new infrastructure, or mortgages from households and companies to pay for apartments and new buildings.

The government is aware of the risk of allowing debt to accumulate quickly. But raising new loans will hurt real estate, a sector that accounts for up to a quarter of the economy.

Another risk to China’s recovery is its heavy dependence on exports. Export growth over the past three months, along with declining commodity import prices, accounted for much of economic growth, which was one of the largest shares of any quarter in a decade. Exports still make up more than 17 percent of China’s economy, more than doubling their share of the US economy.

Chinese leaders acknowledge that the country’s exports are becoming increasingly vulnerable to geopolitical tensions, including steps by the Trump administration to unwind trade relations between the United States and China. Changes in global demand could also threaten exports as the pandemic worsens the economy abroad.

Xi Jinping, China’s top leader, is increasingly emphasizing independence, a strategy that requires expanding service industries and manufacturing innovation, as well as allowing residents to spend more.

“We need to make consumers our mainstay,” said Qiu Baoxing, a cabinet adviser and former deputy housing minister, at a news conference in Beijing. “By focusing on domestic circulation, we actually increase our own resilience.”

But consumer empowerment has long been a problem in China. Under normal circumstances, most Chinese are forced to save on education, health care and pensions due to a weak social protection network. Economic slowdowns and pandemics mean job losses, complicating the problem, especially for the poor and rural.

Beijing’s approach to helping ordinary Chinese during the economic slowdown was to give companies tax breaks and large loans from state-owned banks so that businesses would not have to lay off workers. But some economists argue that Beijing should instead issue coupons or checks to directly help the country’s poorer citizens.

Millions of Chinese migrant workers have experienced at least a month or two of unemployment in the spring as factories have been slowly opening up since the epidemic. The young Chinese found themselves in their savings to eat, or took a second job to make up for the reduced wages.

But Chinese government economists are wary of making direct payments to consumers. They say the government’s priorities are investment-oriented growth and measures to increase productivity and quality of life, such as digging new sewers or adding elevators to the three million old residential towers that are lacking.

“We’ve seen a lot of proposals to increase consumption, but the point is to enrich people first,” said Yao Jinyuan, a former chief economist at the National Bureau of Statistics who is now a policy researcher in the cabinet.

Western governments have experimented with providing extremely large unemployment checks, lump sums and even subsidized meals in restaurants. These payments were aimed at helping families maintain a minimum standard of living through the pandemic, which in turn contributed to the demand for imports from China.

Michael Pettis, a professor of finance at Peking University, said that as people in other countries receiving government subsidies continue to turn to China for food during the pandemic, “we will see a revival of the trade conflict, not just US-China but global.”

Liu Yi and Amber Wang contributed to the research.

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