Economics: Could China Pull The Global Economy Out Of Recession?

 

(Drivebycuriosity) -  The world is still fighting the COVID-19 Pandemic. China  belongs to the first countries which seem to have the corona virus under control. The huge country has just around 20 new  cases daily  (worldometers ). The success allowed China to reopen her economy earlier than the countries in Europe & the Americas. As a result China`s economy started the recovery already in the second quarter of this year.  In Q2 the nation`s GDP gained 3.2% - so the country could avoid a recession which is usually defined as 2 quarters back-to-back negative growth (charts below).

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China`s recovery is happening at a time when the USA and other nations are still struggling with the pandemic which is curbing their economies. China`s economic is not yet big and strong enough to compensate fully the weaknesses in the rest of the world, but the recovery mitigates the global damage already and the country is getting stronger. I suppose in the second half of the year China`s economy will gain speed, helping the global economy even more.

China`s economic growth will accelerate because the negative influences from the pandemic are further abating - sooner than in the US & Europe.  China`s growth story is still intact, thanks to the secular catching-up process which is fueled by the still extreme income & wealth differences from the US and other Western nation standards, and ongoing economic reforms & huge investment into infrastructure.

China, like the rest of the world, is benefiting from an accelerated digitization process, spurred by the corona epidemic. People, who were forced to stay at home for a while, are using the Internet for work, shopping and entertainment more often & intense. The pandemic is boosting the digitization process and supporting 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).

China has already more than 700 million Internet users, many of them with high-speed connections. The rapid digitization process is making China´s economy more efficient and is raising the productivity of China`s companies and so encouraging economic growth (reuters). 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.

The return of China`s economic growth should also ignite the economies in the Pacific Area, including Japan & Australia, thanks to their close economic relations, which will help the global economy out of the recession.