Economics: Will China Lead Global Economy Out Of The COVID-19 Crisis?

 (Drivebycuriosity) - The global economy suffers a sharp economic downturn and Europe & the US are in a lockdown. But one country is already recovering: China. Since mid-march the People`s Republic is coming back to work, even the epicenter Wuhan is slowly coming back to normal. Many indicators, like daily truck flows, within-city travel index or cross-city travel index, show that normal economic activities in China have nearly resumed to the level prior to the epidemic  (seekingalpha). The return to economic growth is also reflected by China`s purchasing manager indices for manufacturing & service industry, very early indicators for economic activity, which both jumped back to normal (charts below).

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The recovery is fueled by a massive economic stimulus program, including several interest rate cuts and tax reductions (ing.com  reuters). China gets also a lot headwinds from historical low oil prices, which reduce the cost for transporting significantly and curb inflation (chart below).

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It looks like that China`s economic growth will bounce back in this quarter - driven by an enormous backlash demand. China`s fresh growth cannot fully compensate the sharp downturns in the US & Europa but it certainly will mitigate the global carnage. In the second half of the year, when the US economy - and maybe also the European - will grow again, strong Chinese economic growth could accelerate the speed of the global recovery.

China`s economy might even get stronger when the corona crisis has past. History shows that consumer and businesses are more willing to change behavior during setbacks (twitter). Innovations typically gain traction during tumultuous times: they get cheaper, faster, more convenient, more productive, more creative.  Companies are streamlining operations and are getting more efficient & productive as they always do when they are challenged.

People, who were forced to stay at home for a while, will use the internet for work, shopping and entertainment more often & intense. This way the virus will boost the digitization process which already has been driving China`s transformation process on her way to become a modern economy where most of the national GDP is created by the service sector (like the USA, UK, Germany and other Western countries). The digitization will drive productivity growth across all industries, leading to more economic growth (driveby).

Alibaba`s CEO Daniel Zhang sees opportunities created by the forces of change ( seekingalpha). He reported that "17 years ago, the e-commerce business experienced tremendous growth after SARS. We believe that adversity will be followed by change in behavior among consumers and enterprises and bring ensuing opportunities". Zhang continued that "we have observed more and more consumers getting comfortable with taking care of their daily living needs and working requirements through digital means...Many, many consumers change their way of living and for many offices many workers change the way of how to work. So people now work remotely from home. People buy foods, buy fresh products, buy groceries, buy necessities from home".

Zhang declares that "after all is done, I would expect that this is an inevitable trend that more and more business and more and more customers will have a digital life or digital working style. So this obviously will -- in the long-term will be good for the digital pace of the whole society".

I assume that the digitization process, which is obviously spurred by the corona epidemic, will make China´s economy more modern and more efficient and will raise the productivity of China`s companies and so encourage economic growth (reuters).