China’s Great Rebound Forward

Abdulrahman
3 min readMar 7, 2021

China was the only major economy in 2020 to grow, logging a growth rate of 2.3%. In 2021, China is aiming for an economy growth rate of above 6%. UN figures demonstrate that foreign direct investment into Chinese firms are at the 4%, making China the global leader in terms of foreign direct investment. China’s recovery can be explained by its early squashing of the pandemic. While some analysts asserted China’s hardline lockdown and quarantine measures as being draconian, it is now clear that the authoritarian measures taken by the regime are what allowed it to recover so well. Now, China has almost returned to normalcy: restaurants, schools, and factories are all open.

However, this is not the only factor that distinguishes China’s economic recovery. Weak global demand does not affect China in the same way that it affects smaller countries such as New Zealand, who also dealt with the pandemic swiftly. Moreover, the CCP re-introduced construction projects and factories, as it is easier to enforce social distancing and math procedures on employees than it is on the general public. The CCP’s low unemployment insurance benefits meant that the state also did not have to support the unemployed. This meant that capital formation — as in, investment and industrial production — was the main driver of the recovery of China’s economy. At the time, this resulted in China having a 3.2% growth rate. In any case, China has made a V-shaped recovery, as demonstrated by this graph below:

It should be noted that the 6% figure is much less than what analysts expected. Analysts claim the expected growth rate is set to beat 8%. Chinese policymakers assert that by having a lower expected growth rate, they may be better able to focus on the quality of growth rather than the quantity. Moreover, a growth rate a little over 6% is easier sustain long-term than a growth figure of 8–9%.

The CCP also has the following goals in terms of job creation in 2021:

1. Over 11 million new urban jobs, more than the objective of 9 million in 2020

2. A budget deficit of 3.2%, less than the 3.6% budget the previous year

3. A local government special issuance of $564 billion, down from the $579 billion figure of 2021.

4. A 2021 objective of about 3% for consumer price inflation, down from the objective of approximately 3.5% of last year.

Still, there are significant issues when it comes to China’s economic recovery. Some sectors in the Chinese economy have benefitted more than other. Exports — especially masks and sanitizers — as well as consumer-oriented electronic devices were needed to met the global demand amidst the pandemic. Moreover, China’s private consumption, for the first time since 2015, will contribute less to the economy than investment will. This will reverse Chinese policymakers’ efforts to be less reliant on foreign investment, as well as — at least in the mind of Chinese policymakers — reverse China’s efforts in stabilizing its debt.

Despite that, China’s recovery is still exceptional in nature. There is no reason to believe that COVID-19 will be the last pandemic, and as such, the Chinese recovery plan may be a model for other major economies to follow, even if only partially, in the future.

Sources:

https://www.washingtonpost.com/world/asia_pacific/china-economy-growth-coronavirus/2021/01/17/2138ef2c-5935-11eb-a849-6f9423a75ffd_story.html

https://www.bbc.com/news/business-56289063

https://www.bbc.com/news/business-55791634

https://www.wsj.com/articles/the-west-is-misinterpreting-wuhans-coronavirus-progressand-drawing-the-wrong-lessons-11585074966

https://theconversation.com/china-beat-the-coronavirus-with-science-and-strong-public-health-measures-not-just-with-authoritarianism-150126

https://www.aljazeera.com/economy/2021/3/5/china-sets-modest-6-economic-growth-target-amid-covid-rebound

https://www.economist.com/the-world-ahead/2020/11/17/chinas-economy-will-hold-up-well-in-the-coming-year

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Abdulrahman

A smile in the face of your brother is a charity :)