Why only China will maintain positive growth this year

Chinese financial commentator Tan Haojun looks at what China has done right to quickly recover after the pandemic, and what makes international financial institutions and analysts confident about its economy.
People wearing face masks as a preventive measure against the Covid-19 coronavirus commute during rush hour in Beijing on 15 October 2020. (Nicolas Asfouri/AFP)
People wearing face masks as a preventive measure against the Covid-19 coronavirus commute during rush hour in Beijing on 15 October 2020. (Nicolas Asfouri/AFP)

Recently, international organisations have released forecasts and outlook reports on the world economy in 2020 and 2021. One common view is that given this year’s global economy, only China will maintain positive growth — everyone else will see negative growth.

The International Monetary Fund (IMF) forecasts a 1.9% growth rate for China’s economy in 2020, up by 0.9 percentage points from its 1% forecast in June. It also forecasts an 8.2% growth rate in 2021. The World Bank forecasts a 2% growth rate this year, one percentage point higher than its 1% forecast in early June, and 7.9% growth for next year.

It is a case of doing well and giving others no reason to criticise even if they want to.

“Big Three” credit rating agency Fitch Ratings gave the best forecast for China’s economic growth this year at 2.7%, 1.5 percentage points higher than 1.2% previously, and a 7.7% forecast for economic growth for next year. Most other international organisations are optimistic about China’s economy, with forecasts between 2% and 8%.

containers
Containers are seen at the Yangshan Deep-Water Port in Shanghai, China, 19 October 2020. (Aly Song/REUTERS)

Positive forecasts backed by major efforts

Clearly, these international organisations are optimistic not because they particularly like China, or are biased towards it. Indeed, in the past couple of years, some international organisations have been badmouthing China’s economy, companies, and finance. The shift in assessment is definitely not because their attitude towards China has improved or because they are now on more amicable terms with China, but because China’s economy is steadily moving up. In particular, the Chinese government’s ability to handle complex situations has prompted some international organisations to change their minds. It is a case of doing well and giving others no reason to criticise even if they want to.

The fact is that China has been able to come together against the pandemic, quickly restart work and production for supply chain recovery, and drive the “domestic circulation” of its economy. It has also taken the initiative to help other countries to fight the pandemic.

... over the eight days of the National Day holiday, 637 million domestic tourists spent some 466.56 billion RMB, marking a recovery of 80% and 70% respectively over the same period last year.

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Workers assemble power distribution cabinets at a factory in Hangzhou in eastern China's Zhejiang province on 19 October 2020. (STR/AFP)

As a large and populous country, China faces far more pressure in handling the pandemic than other countries, especially considering that the pandemic broke out during China’s traditional Spring Festival, where human flow is at its highest. Under the circumstances, China managed to bring the pandemic under control in just three months. And when the pandemic spread globally, it effectively controlled imported cases with strict barriers to entry.

Chinese companies out of the woods

When restarting work and production, pandemic controls did not slacken in China — both “hands” were active and firm. Hence, the pandemic did not disrupt the restart process, and the resumption of work did not cause its resurgence. High-density areas such as malls, cinemas, and attractions also did not see a spread of the virus. This allowed the restart of the economy to happen sooner and faster. In particular, this year’s National Day long weekend of 1 October marked China’s major victory against the pandemic, and gave people more confidence and resolve to start spending.

Figures show that over the eight days of the National Day holiday, 637 million domestic tourists spent some 466.56 billion RMB, marking a recovery of 80% and 70% respectively over the same period last year. Food and beverage, physical stores, hotels, and cinemas have also recovered by about 70%; “revenge spending” has finally surfaced like love delayed. More importantly, even with the heavy human flow, there was no new outbreak of the coronavirus, which further helped to increase consumer confidence. Many people said they wanted to find more opportunities to travel and spend.

golden week
People wearing face masks walk past shops during the country's national "Golden Week" holiday in Beijing on 8 October 2020. (Noel Celis/AFP)

When it comes to enterprises, since the recovery process began, from the central level to the local level, many policy measures have been taken to help enterprises resume work and production and quickly stimulate the supply chain. In particular, there has been a slew of policies — financial, tax, macro, micro, general, focused, existing, and new — to help small, medium, and micro enterprises, to provide whatever is lacking.

Whether it is US- or European-funded companies or Asian companies from Korea or Japan, they are not thinking of pulling out of China. On the contrary, they are seeking to invest more in China

At the same time, China has leveraged the opportunity of handling the pandemic to reform its administrative approval system, simplify work processes, and increase service efficiency. All this has helped enterprises to recover. So far, most enterprises have basically resumed normal operations — at least, they are able to satisfy market demands. What needs to be done is to effectively expand market demand through domestic circulation, to shore up overall economic recovery.

Foreign companies not pulling out of China

Recently, some foreign media have been badmouthing China and saying that foreign-funded companies are pulling out of China in droves; but other ethical foreign media have also carried out in-depth investigations and published fair and objective reports refuting such claims. Whether it is US- or European-funded companies or Asian companies from Korea or Japan, they are not thinking of pulling out of China. On the contrary, they are seeking to invest more in China, for the simple reasons that China’s economy is stable, the Chinese government is able to handle complex affairs, and China has a huge consumer market.

So, it is not an accident that international organisations are optimistic about China’s economy, nor is it because they are biased towards China or particularly like it. Through its actions, China has answered questions that other countries have not; it has overcome difficulties that other countries have not; it has resolved tough issues that other countries have not.

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