• Research
  • Emissary
  • About
  • Experts
Carnegie Global logoCarnegie lettermark logo
DemocracyIran
  • Donate
{
  "authors": [
    "Yukon Huang"
  ],
  "type": "commentary",
  "centerAffiliationAll": "dc",
  "centers": [
    "Carnegie Endowment for International Peace"
  ],
  "collections": [
    "Coronavirus"
  ],
  "englishNewsletterAll": "asia",
  "nonEnglishNewsletterAll": "",
  "primaryCenter": "Carnegie Endowment for International Peace",
  "programAffiliation": "AP",
  "programs": [
    "Asia"
  ],
  "projects": [],
  "regions": [
    "East Asia",
    "China"
  ],
  "topics": [
    "Economy",
    "Trade"
  ]
}

Source: Getty

Commentary

China’s Economic Growth Now Depends on the West

China’s producers hope to restore capacity in the weeks ahead, but sagging demand in export markets could hold back economic recovery.

Link Copied
By Yukon Huang
Published on Mar 19, 2020
Program mobile hero image

Program

Asia

The Asia Program in Washington studies disruptive security, governance, and technological risks that threaten peace, growth, and opportunity in the Asia-Pacific region, including a focus on China, Japan, and the Korean peninsula.

Learn More

China’s leadership expected that economic growth in 2020 would be a celebratory event, marking a doubling of the economy’s size over the past decade. The new coronavirus, however, has obliterated those forecasts.

Beijing’s draconian measures brought the epidemic under control sooner than anticipated. Although the extent and speed of the virus’s spread paralyzed Chinese society, the nationwide shutdown led to the epidemic’s slowdown in mid-February. On March 10, Chinese President Xi Jinping took a victory lap by visiting the epicenter of Wuhan, capital of Hubei Province. By March 19, the number of new domestically driven cases fell to zero. All other new cases were recent returnees who found it safer to be in China than in Europe, the epidemic’s new epicenter, or the United States, where the spread of the virus is accelerating.

Yet the economic damage to China is severe, and its prospects for recovery—even with massive financial support—remain uncertain. Sustainably restoring China’s productive capacity in the coming weeks would require an unlikely revival of U.S. demand. China’s recently announced economic indicators for January and February were much weaker than market watchers had forecast. Year over year, retail sales fell by 20.5 percent and industrial production by 13.5 percent—China’s worst numbers on record.

The prolonged containment effort has left hundreds of millions of migrant workers unable to return to work, and factories are now struggling to get back to full capacity given the shortages of labor and essential parts. Analysts have downgraded their outlook for the Chinese economy and consider a historic contraction in the first quarter nearly guaranteed. Even with a major fiscal stimulus and interest rate cuts, estimates for 2020 growth vary from 1 percent to 4 percent against the original target of 6 percent.

By contrast, the 2002–2003 economic recovery from the SARS virus was V-shaped, as China made up the entirety of its short-term losses by quickly tapping strong consumer demand in the West. China was relatively unaffected by the 2008 financial crisis, when global production and supply networks continued to function, enabling it to maintain rapid growth.

While China’s economy is slowly restarting, major European economies are in turmoil and the United States is still in the early stages of ramping up its response with unprecedented fiscal measures. China will likely struggle to find enough customers across the West, and emerging markets elsewhere are simply not large enough to compensate. Affected sectors include automobiles, as major Western companies have closed down production, and communications equipment, as supply chains have been disrupted.

The outbreak will likely force a reexamination of the logic underpinning the U.S. administration’s extensive use of tariffs to pressure China on trade and investment reforms. The phase one trade deal concluded in January is now inoperative, since there is no possibility that China can meet its agreement to purchase vast quantities of American goods this year. More importantly, the U.S. strategy to pair tariffs with trade restrictions is incompatible with new priorities, such as ensuring producers have access to necessary parts. For better and for worse, the global economy is based on connectivity. The revival of world trade and well-functioning supply networks is essential to resuscitating growth in both China and the West.

About the Author

Yukon Huang

Senior Fellow, Asia Program

Huang is a senior fellow in the Carnegie Asia Program where his research focuses on China’s economy and its regional and global impact.

    Recent Work

  • Q&A
    What to Watch When Trump and Xi Meet in Washington
      • Sheena Chestnut Greitens
      • Oriana Skylar Mastro's headshot
      • +1

      Sheena Chestnut Greitens, Oriana Skylar Mastro, Yukon Huang, …

  • Commentary
    Three Takeaways From the Biden-Xi Meeting

      Yukon Huang, Isaac B. Kardon, Matt Sheehan

Yukon Huang
Senior Fellow, Asia Program
Yukon Huang
EconomyTradeEast AsiaChina

Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.

More Work from Carnegie Endowment for International Peace

  • Commentary
    Carnegie Politika
    Stalled at the Front, Russia Seeks to Undermine Ukraine’s Economic Capacity

    Russian strikes are weakening the economy sustaining Ukraine’s war effort. Closing the growing funding gap will require more European support and politically contentious reforms in Kyiv.

      Balázs Jarábik

  • Commentary
    Strategic Europe
    The EU’s Middle-Power Puzzle

    While the EU and European governments are embracing the much-lauded middle-power moment, this entails three difficult conundrums.

      Richard Youngs

  • The Scramble for Europe. Russia, China, and Turkey Challenging Regional Order
    Book
    The Scramble for Europe. Russia, China, and Turkey Challenging Regional Order

    Europe is facing rising populism internally as well as external pressures from Russia, China, Turkey, and the United States.

      Dimitar Bechev

  • Commentary
    Strategic Europe
    How the EU’s Single Market Could Unlock Enlargement

    Much has been said of the changes Brussels is trying to make to the EU enlargement process. Here’s why gradual integration might—or might not—be the answer.

      Dimitar Bechev

  • Crowds and businesses on the streets of Colombo, Sri Lanka
    Article
    Sri Lanka’s Economic and Geopolitical Balancing Act

    Economic recovery has brought Sri Lanka a modicum of stability, but domestic strains and great-power rivalry could test how long it lasts.

      • Avinash Paliwal

      Avinash Paliwal

Get more news and analysis from
Carnegie Endowment for International Peace
Carnegie global logo, stacked
1779 Massachusetts Avenue NWWashington, DC, 20036-2103Phone: 202 483 7600
  • Research
  • Emissary
  • About
  • Experts
  • Donate
  • Programs
  • Events
  • Blogs
  • Podcasts
  • Contact
  • Annual Reports
  • Careers
  • Privacy
  • For Media
  • Government Resources
Get more news and analysis from
Carnegie Endowment for International Peace
© 2026 Carnegie Endowment for International Peace. All rights reserved.