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.
Comments(12)
America's dependency on China for a broad range of critically important goods is now exposed and decoupling will begin as soon as the U.S. economy begins to recover. If China wants to sustain growth it will simply have to boost domestic demand by aggressively transferring wealth from the privileged to the masses. Which almost certainly will not happen.
"America's dependency on China" is not a result of some sort of conspiracy, it is based on fact that labor in the West too expensive, while in China workers do pretty much the same thing for the fraction of cost, thus significantly lowering cost price. Yes, it is possible to a certain extent return the products to the Western countries, but it will require to drive wages down to Chinese (or other similar countries), with minimal wage around 100 USD per month, and average worker monthly paycheck around 300 USD. Western lifestyle is unsustainable anyway, so maybe it is the right time to tighten the belts. And maybe get rid of the American obesity crisis along the way - with the new level of paychecks US citizens will simply be unable to eat as much. Also, unemployment in the West, with its oncoming aging crisis, is pretty low (except some Mediterranean countries) - there are simply not enough hands to replace Chinese workers.
The West owes China nothing. You seem to have forgotten that the cover up instituted by the Chinese government is what has made this pandemic what it is. Being able to act quickly with draconian measures after months of reckless behavior isn't a very inspiring model to follow. Rather it seems a guarantee for long-term instability. If China can't keep to its commitments then it's because they shot themselves in the foot. Instead China is acting as if the West is the problem. Incredible!
Such ignorance of facts need to be address. First From the INITIAL 41 hospitalized confirmed patients in Wuhan,13 patients had NO LINK to the marketplace says Dr Daniel Lucey, an infectious disease specialist at Georgetown University. Patients became ill 1 December, 2019. 2.First human infection must occur sometime in November, 2019 as incubation period had to occur before signs and symptoms presents itself. After that cluster of cases occur in Wuhan and trace to Huanan Seafood Wholesale Market. 3. Per Dr Daniel Lucey: " The virus came into that marketplace before it came out of that marketplace." Translate: It was imported from outside. Not marketplace. 4. Significance of October-November or earlier in 2019 patients infected with COVID19 could have spread much earlier 5. Spread of virus already started person to person October-November and increase in December. This explain some of the 13 of the 41 patients who had no exposure to the "wet market in Wuhan." 6. This SILENT, UNRECOGNIZED spread among other types of pneumonia need to be consider when there was no specific diagnostic test for several months before its discovery in early January 2020. By then this virus has spread to other places in China and other countries. 7. China COULD NOT have instituted earlier preventive measures against an UNDISCOVERED virus. Key: Is it Fair to Blame China for an Undiscovered, Unrecognized virus where there were NO TEST at that time?
The key is to relocalise supply, not revive the cause of the problems.
US and the West should really think about how to source their needs. It is NOT a great idea to be partnering with China for critical supply chain goods and items as US found out during this pandemic. I am sure there will be sour searching on the value of globalization in the post analysis of this crisis. I fully expect US to act on setting up protections and localization of supply chains. this epidemic has handed Trump a chance to say "look I said so"...
but the supply chain is most complete in china, if the factory back to local, the cost and efficiency will be a big problem.
manufacturing needs to return home, it is OK to say labour is too expensive, but unless those stating this work at Asian wages my answer would be so what if they are dearer. A hairdresser doesn’t work at Chinese wages, or a dentist, should I stop going to Western dentists and go say twice a year while on holiday in Asia, until US or Western dentists bring their costs. if we all did this how long would we be rich for. Manufacturing needs to come help and technology (robots, IT ect) used to reduce costs.
Could we be reaching an APEX, with Covid 19 cases, says The Wolf of Wall Street, Mr. Omar Abdulla?? by Sameera Dursot (13 April 2020—Bloomberg) The Wolf of Wall Street, Mr. Omar Abdulla says that fewer and fewer cases are being reported from Covid 19 infected areas New York, Wuhan, Lombardi and Gauteng in the last several days, which is offering some confidence in the market. “We are seeing a plateau in the deaths across these communities and hopefully we could see some of the losses felt during the period being eased.’ elaborated, Pres. of The United States, Mr. Donald Trump. CNN reported that cases in The United States are seeing a slowing amid the mitigation and isolation process but we still have to keep to our social distancing. The White House task team Doctor Anthony Fauci deliberated that cases are falling slowly, and that we should all remember the thousands of dead at this critical time. “We are not saying that people will get to work within the end of April, but what we are seeing is a slowdown in infections.’ President of South Africa, Mr. Cyril Ramaphosa noted that cases in South Africa are approaching 2500, after all South African’s were in a lockdown. “I will be meeting with senior government officials to see if we can release the lockdown, with strict curfews.’ However, The African Times reported that hundreds of Africans were still infected and the mitigation processes still have to be kept in place. “Africa has a very weak hospital structure, and if we have an outbreak similar to Spain or The United States we could be in deep trouble. Let’s pray that our isolation methods continue as we see more cases continue to drop.’ The Omar Abdulla Group which owns shares into Footprints Filmworks, Bitcoin SA, Forex SA, Instagram SA and South African airways says that perhaps it is the time to see a reversal in the market, slowly buying South African shares and other shares in Europe and The United States. “We will be looking at buying small amounts of these shares, and increasing our leverage and buying as less cases are reported. We are eyeing shares into Eskom, China Mobile, South African Airways and laying out more shares of The Omar Abdulla Group on the medium of individuals to trade.’ With cases showing a slight drop, market prices slowly recovering and more stimulus packages being distributed we should remain slightly positive on the outlook for the next quarter, no withstanding that this pandemic could take as much as two years to recover to the prices we were at. “Oil looks like a good buy now, gasoline looks like a good buy now, and shares generally are a good buy with good hedges into Gold and Silver.’ ended The Wall Street Journal. ------------------------------------------------------------------------ COVID 19 CASES TO REACH ONE MILLION, with markets STILL “Bearish,’ says The Wolf of Wall Street…?? by Aaliah Khota (3 April 2020—Reuters) The Wolf of Wall Street, Mr. Omar Abdulla who is currently In isolation in his Washington home, says that ‘new cases,’ in The United States, Spain, Italy and Britain have ‘jumped up,’ within the l a s t several weeks, and expects markets to continue their downward spiral amid the Corona Virus. “This Chinese Virus has already cleaned out so many old age homes and Metropolitan districts, that we have to quarantine our Covid 19 patients in states that are less affected. Thus far, high alerts have been issued in New York, California, Philadelphia and Dallas.’ President of The United States, Mr. Donald Trump echoed. Whilst prices across the globe have already remained cheap, markets are still open, expecting cases to drop by May or even June, reported BBC NEWS. “Europe is infected beyond control, Italy is in a mess, Spain is in shambles, and Britain cannot cope with high infections in the hospitals as we expect more cases.’ looped The World Health Organization. Speaking to Footprints in Washington, local resident, Ms. Jenifer Samson noted that Washington has been on a ‘lock down,’ as more cases come through. “President Trump is being too optimistic to open for the country for business. As the curve flattens and starts to drop, that’s when we can only plan to open up our borders. With the high number of cases reaching one million, Easter will have to be spent at home.’ The Omar Abdulla Group which owns shares into Bitcoin SA, Forex SA, Instagram SA, Twitter SA and South African Airways noted that he had just purchased more shares In some companies, expecting the curve to drop within the next few months. “We are in close negotiations to free up some more money so that we may purchase more of these blue-chip companies at low prices.’ Other celebrities including Justin Bieber, Selena Gomez, Kim Kardashian, Kendell Jenner, Christiano Ronaldo and Lionel Messi kicked that they have been spending their time in isolation playing football, watching videos on The Omar Abdulla Group, spending quality time with family, and studying. Meanwhile, The Washington Times concluded that The Wolf of Wall Street, Mr. Omar Abdulla was speculative on South African companies, as the third world country, has showed some positive outcomes. “I am confident that the rand will do much better, with President Cyril Ramaphosa’s strict approach to lock down the country. He is a strong minded president and my talks with him, could see more buying into Eskom, SABC News, and other SEO companies.’
Captain Covid, disagrees with President Ramaphosa to ‘release lockdown…’ By Zahra Lockhart (7 May 2020—FF News) Captain Covid, Mr. Omar Abdulla says that the release of the lockdown could have ‘dire consequences,’ for South Africa, with cases reaching 5000 in the African nation and close to four million worldwide. “The President is thinking of boosting the economy with his release of the lockdown, yet this could have a negative effect causing cases in the mother nation to rise, and the increase of the spread of the virus.’ he looped. Meanwhile, across the world, Covid 19 cases are starting to roar with the latest cases at meat packaging plants, nursing homes, grocery stores and pharmacies. “President Trump was too slow to close down The United States, and President Ramaphosa is too quick to open up the country. We could see a surge in cases and the rand reach R23.’ growled South Africa Today. Speaking to Footprints in South Africa, local resident Ms. Thando Sithole added that there is absolutely ‘no social distancing,’ in the townships of Soweto, Secunda, Khayalisha, Laudium, Lenasia, and Sebokeng. “President Ramaphosa is acting too quickly, and soon we will be in a lockdown again.’ However, Oil prices around the world are still plummeting due to a lack of demand and the cut in production with Saudi Arabia and Russia. “There is simply too much oil in the world, and we are running out of storage space.’ reported The Economic Times. Chewing on his pen and waving his hand through his hair, Captain Covid, Mr. Omar Abdulla says that outbreaks in South Africa are pretty low, but we could see a spike in new cases in Pharmacies, Grocery stores and meat packaging companies. “President Ramaphosa is releasing the lockdown too early, and I can foresee more cases with more outbreaks at these facilities. Our request to the president is this is too quick and more lives will be lost.’ The Omar Abdulla Group which owns shares into Bitcoin SA, Forex SA, Instagram SA And Twitter SA said on their website that they will continue to buy small amount of shares into SEO companies Eskom, Telkom, South African Airways and SABC. “After receiving over R500 billion rand in loan packages and treasury bond sales, we could see an uptick in these shares.’ In o t h e r news, a UFO that was spotted and released by The Pentagon is said to be aliens either to cure us from The Corona Virus, and make the virus strain even stronger in parts of The United States and Europe. “The flying sauces that were seen recently could be a sign that we are not alone.’ NASA said on their website. The Holy month of Ramadaan has now hit the world, with Mr. Omar Abdulla said to meet with Islamic leaders including Mufti Menk, Zain Bhika and Maher Zain. “We wish all our Muslim leaders a peaceful and joyous Ramadan and Eid.’ Concluding his remarks to The Sunday Times, Mrs. Imaan Desai kissed that he agrees with The Omar Abdulla Group and once the lockdown has been released, within a few weeks, we will be in lockdown again.
China has stolen its past performance from its future. It is now time to pay the price and it doesn't look like China is in a position where it can. Household debt to income has been increasing while their investments in oil derivatives and speculative real estate have tumbled. Local officials are rebelling against Xi's mandates, Chinese are protesting against the government with their lives on the line, companies are moving production out of China, their aging population is increasing the burden on the government and the world is quickly closing their doors to China's bullying and corrupt practices. This is likely the pivot point for China's economy.
Excellent observations excellently written. In my view, export growth was a significant driver of GDP growth even in recent years when the net exports share of GDP was much lower than 10 or 20 years ago. Likewise, FDI fueled licit and illicit technology transfers (thus more growth) while also providing foreign exchange reserves. The drop in these, together with the numerous other factors you mention, lead me to conclude that in order for China to sustain growth (and in particular, growth in the masses' real income, which is the foundation of the CCP's social contract) it must pump up consumption's share of GDP. China has run out of room for massive fiscal stimuli and therefore the only recourse remaining is a major rebalancing of income and wealth. Income inequality (real, not officially reported) is very high in China. Efforts to rebalance toward advanced economies' norms would meet extraordinary resistance from the wealthy and powerful, while failure to rebalance will consign the masses to permanently accepting only that which they now have. And the latter will result in social upheaval.
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