On Tuesday, October 13, the International Monetary Fund (IMF) revised its country 2020 and 2021 economic outlook. The multilateral lending institution projected that Chinese economy will grow 1.9% and 8.2% in 2020 and 2021 respectively. The numbers are not a surprise because of China's successful containment of the COVID-19 pandemic and the government’s effective policies in reversing the economic downward trajectory created by the virus.To get more China economy news, you can visit shine news official website.
China successfully contained COVID-19 a few months after its outbreak in January, allowing it to reopen the economy sooner than any major economy. In addition, the government introduced a series of stimulus packages, providing funds to help consumers and businesses to address the economic losses, culminating in a 3.2-percent growth in the second quarter. A stronger recovery is expected in the third quarter, estimated at around 5%.
However, China will likely encounter some strong head winds in the foreseeable future. Surging COVID-19 in Europe, the Americas, India and other parts of the world could dampen the global economic recovery. Both Donald Trump and Joe Biden would likely retain tariffs on Chinese imports if their campaign rhetoric is any indication. The U.S. Congress would not let up on its anti-China policies.
And the geopolitical conflict between the U.S. and China will likely continue because of ideology and the hundreds of millions of dollars in campaign funds many of lawmakers in the U.S. Congress are receiving from lobby groups, particularly those representing the military-industrial complex. In receiving the political donations, lawmakers promote the groups' interests. To justify massive arms purchases, enemies and tensions must be created. China, of course, is the "ideal" enemy because the differences in political system, Asian, and deemed a near-peer power with the economic and military muscles to challenge U.S. supremacy. And conflict has spilled over to the economic realm, undermining the two countries' trade relationship.
The U.S. is pressuring countries in the Asia-Pacific to take sides, risking the region's economic prospects and stability. The "forced" U.S.-Japan-South Korea alliance culminated in the two Asian allies losing considerable amount of exports to China, their largest market and trade partner. For example, Samsung lost billions of dollars of chip sales to China because the U.S. barred the company from selling the products to Huawei and other Chinese companies.
Another harmful impact on the Chinese economy is the surging numbers of COVID-19 infections and deaths around the world. According to the World Health Organization and U.S.-based Johns Hopkins University, each of these countries or regions registered over 40,000 new cases daily. To stop the spread, these countries/regions are imposing more lockdowns, that in turn would slow down the economy and therefore reduce imports from China.
That said, China's strong government, huge financial toolkit, increasingly affluent large domestic market and the Belt and Road Initiative would likely cushion many of the adverse economic impacts of external shock. The Chinese government has demonstrated competence and political will to use its wealth in implementing effective and timely policies to reverse adverse economic impacts. For example, the Chinese government mounted a $586 billion stimulus package which reversed the economic downturn from 6.5% in 2008 to 9.2% in 2009. That, in turn, jump started economic development in some emerging markets and prevented some developed ones from falling into a recession.
It would appear that the Chinese government is onto a similar path in addressing the negative economic impacts caused by the COVID-19 pandemic. Earmarking hundreds of billions of U.S. dollars for infrastructure construction, $1.4 trillion for technology research and development, and the implementation of the "dual circulation" strategy over the next five years could be the answer to post-pandemic economic recovery not only in China, but also the rest of the world. Like the 2008 stimulus package, the policies would increase domestic aggregate demand and imports.