Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

China's Accelerated Economic Recovery Key to Global Growth

Economics / China Economy Jan 28, 2021 - 01:40 PM GMT

By: Dan_Steinbock

Economics

Unlike other major economies, China has rebounded and its recovery is accelerating. It could fuel a third of global economic growth in 2021.

With the Spring Festival holidays just weeks away, recent resurgences of COVID-19 infections in Jilin province and Shijiazhuang, Hebei province have renewed concerns about sporadic outbreaks.

China’s public-health authorities believe a major outbreak of the novel coronavirus in the Chinese mainland is unlikely. The authorities have taken strong containment measures to rapidly identify, isolate and control potential outbreaks.

Nonetheless, despite the holidays, Chinese people have been urged to avoid travels, to keep the infection rate under control. Downside risks permit no complacency in the foreseeable future.


In the light of the lockdowns in major economies and the number of global cumulative cases at 100 million, current Chinese figures are marginal. International risks associated with the pandemic and external demand are a different story.

Already variants of the virus, identified in the United Kingdom, Brazil, South Africa, and the United States have shown to be more transmissible. New adverse mutations loom in the horizon.

As the World Health Organization recently cautioned, the first half of 2021 may be tougher than 2020, at least in the United States, Western Europe and even Japan.  

The question is, will China’s recovery prevail amid the dire global landscape?

Key indexes signal broad recovery

In 2020, China was the only major economy to avoid negative economic growth. Amid the pandemic and perhaps the severest contraction in modern history, China’s real GDP growth of 2.3 percent exceeded expectations.

The performance relied on fiscal and monetary support, but as recovery is accelerating, monetary easing no longer seems warranted. In the mid-December Central Economic Work Conference, the top authorities took note of the economic success, while stressing the need to further foster the foundations of recovery.

Although consumption is still constrained, recovery is accelerating. And investment is likely to be buoyed by government-financed infrastructure projects and solid performance in the property market.

In November, the indexes for manufacturing, service, trade and consumption were encouraging. Growth in the 4th quarter of last year rose to 6.5 percent year-on-year as consumers returned to malls, restaurants and cinemas.

According to the National Bureau of Statistics, both production and demand indicate the economy is “recovering steadily.” That signals across-the-board recovery. As a result, the yuan has surged in strength against the US dollar and other major currencies, which could foster Chinese companies’ mergers and acquisitions.

This year China’s economic growth is widely expected to rise further to or above 8 percent. Rapid recovery has brought Chinese economy closer to the US economic output, which it could surpass by the late 2020s.

Structural reforms prevail, financial integration accelerating   

China has taken vital policy steps, including the implementation of the Foreign Investment Law, to further open up its economy. Despite the Sino-US tensions, foreign companies continue to pour money into China. In real terms, inbound foreign direct investment in China hit a record high of $144 billion in 2020.

In November, China signed the Regional Comprehensive Economic Partnership (RCEP) agreement with the 10 ASEAN member states, plus Japan, South Korea, Australia and New Zealand. That will facilitate regional trade and boost economic recovery in the participating countries and the region.

Despite the Trump tariff wars, the impressive increase in China’s exports pushed the trade surplus to a record high in December, with soaring demand for medical and other products needed to fight the pandemic, especially medical equipment and work-from-home technology. Due to the effective containment of the epidemic in the 2nd quarter, Chinese factories could respond to the global demand for such products, while other countries struggled with quarantines and lockdowns.

The Trump administration’s measures to delist Chinese companies from the US stock exchanges and prohibit US investment in Chinese companies failed to halt, let alone reverse, deeper financial integration between the Chinese and US economies.

In effect, the integration of the Chinese financial market with the global financial markets has accelerated. China’s regulatory reforms have opened its financial markets to many foreign financial institutions, including those in the US. Consequently, foreign ownership of onshore Chinese stocks and bonds is likely to increase in 2021.

China fueling over a third of global growth prospects               

Despite rising protectionism, geopolitics, the COVID-19 pandemic and the severe global economic recession, China has persisted in its quest for opening-up. That has had positive spillover effects on global economic recovery.

Focused on strengthening the social safety nets and advancing key reforms, China will continue to foster its recovery and try to ensure balanced, high-quality growth. That, in turn, will benefit both China and the world.

In the coming weeks, the Biden administration must decide whether it will continue the Trump trade wars or opt for a more balanced stance. The former would harm global recovery, especially in Asia – and vice versa.

In December, advanced economies’ Organization for Economic Co-operation and Development (OECD) forecast that global GDP will reach the pre-pandemic level by the end of 2021. In the OECD view, China will account for over a third of world economic expansion.

That contribution is critical, due to the devastating global economic contraction and lingering damage in lost lives and economic suffering.

Dr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/  

© 2021 Copyright Dan Steinbock - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dan Steinbock Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in