How can China drive a global economic recovery from COVID-19?
People walk to shop at the Chuhehan Street in Wuhan, Central China's Hubei Province on Sunday. (GT/Li Hao)
As more encouraging signs emerge that the Chinese economy is on a steady path to recovery, expectation is also rising for the world's second largest economy and biggest growth driver to play a larger role in helping revive the global economy, which is expected to see the worst crisis since the Great Depression due to the global coronavirus pandemic.
After recording the biggest GDP contraction in decades, China, powered by a raft of robust fiscal and monetary policies, is seeing a speedy recovery in a wide range of sectors from industrial to new investments, offering a glimpse of hope for global demand in everything from agricultural products and car parts to services, Chinese analysts said on Tuesday.
However, unlike during the global financial crisis in 2008, when China's massive stimulus packages were widely credited to have saved the global economy, China will not open the floodgate of stimulus, but will instead focus on targeted measures that are essential for sustainable growth in not just the Chinese economy but the globe, analysts noted. Also global cooperation in saving the world economy is necessary, including coordinated efforts to reopen supply chains, they added.
The latest sign of steady recovery in the Chinese economy came in the form of rising power consumption, a closely monitored gauge of economic activities. Between April 1 and 15, total power generation in the country grew 1.2 percent year-on-year, compared to declines in previous weeks, according to data from the National Development and Reform Commission (NDRC), the top economic planner, on Monday.
Geographically, seven provinces, including Southwest China's Yunnan Province, saw growth in power consumption, the NDRC said. Power consumption by nonferrous metal, pharmaceutical, electronics, chemical, steel, mechanic and other industrial sectors have also resumed to the same level as last year. Logistics, including rail freight, have returned to normal levels and major investment projects have also moved forward, the NDRC said.
The latest signs add to an increasingly clearer and brighter picture for the Chinese economy, which, if it continues to pick up pace in work resumption and risks of a second wave of the pandemic are averted, could return to expansion in the second quarter and reach an annual growth rate between 1 and 5 percent, according to various estimates. The IMF, for example, predicated a 1.2 percent growth for China during 2020. "The global situation remains unclear after the pandemic, but China's economic recovery is definitely good news for the world, at least in terms of confidence," Wang Xin, President of Charigo Center for International Economic Cooperation, a domestic think tank, told the Global Times on Tuesday.
Given China's unique role in the global supply chain, work resumption at Chinese factories and consumer markets means rising demand for raw materials, agricultural goods and manufactured products from around the world - the key to a global economic recovery, analysts noted. China is the largest merchandise trader, with exports accounting for about 13 percent of the global total in 2018, according to Wang.
As many of the world's major economies from Europe and the US to Japan remain severely damaged by the coronavirus, which, according to the IMF, could see contractions of 5.2 percent or more, many around the world are turning to China for playing a larger role in pulling the global economy up.
In an editorial on Monday, the Financial Times called China's economic role "a chance to show global leadership." The article welcomed recent calls from China's top leadership to roll out more fiscal and monetary policies to support its economy, but also alluded to the lack of "a credit bazooka" like during the global financial crisis.
China has been swift in rolling out economic relief measures since the outbreak began, including a series of fiscal and monetary policies to support businesses. In the first quarter alone, new yuan-denominated loans reached a quarterly record high of 7.1 trillion yuan ($1 trillion), though most of it went into the services sector and small and medium-sized enterprises instead of infrastructure like during the global financial crisis.
Also more stimuli are on the way. Following a high-level meeting on Friday, during which top officials called for more policy measures, China has lowered its market-based benchmark lending rate on Monday and is reportedly mulling special government bonds totaling over 1 trillion yuan to support businesses.
Still, Chinese officials have been largely relying on targeted measures to help specific sectors and businesses, compared to the broad-based massive easing in other economies such as the US and the EU.
However, that does not stand in the way of China's ability to boost global demand, and there are more innovative and sustainable ways for China to help the global economy, analysts noted.
Qin Meifeng and Pan Yuxin, Pan Wenming's mother and his daughter, whisper in the yard at home in Tunqiu Village of Pingshan Township in Luzhai County, south China's Guangxi Zhuang Autonomous Region, April 17, 2020. (Xinhua/Huang Xiaobang)
"We don't need the same endless easing as in the West, what we need is targeted support for those hit hard by the epidemic. That is the most effective way to revive the Chinese economy," Cao Heping, a professor of economics at Peking University, told the Global Times.
Cao noted that once recovered, China could boost global demand and ultimately contribute between 35 and 40 percent of global growth this year, compared to roughly 30 percent in 2019.
China's demand for many commodities has already been surging. In March, imports of crude rose 4.5 percent year-on-year and iron ore grew by 1 percent, according to customs data. The pace picked up last week, when imports of metal minerals jumped 31.7 percent year-on-year.
China also continues to open up its market for more foreign goods, services and capital, including setting up more free trade zones and efforts in transport and customs clearances to facilitate trade. China is also moving ahead with its flagship China International Import Expo in Shanghai, which saw $71.13 billion worth of deals in 2019.
China has also pursued global cooperation and coordination with other countries in reviving the global supply chain and minimizing the impact of the pandemic on global trade, said Liu Jianying, an associate research fellow at the Chinese Academy of International Trade and Economic Cooperation.
In a significant step in global cooperation that other countries could follow, China and South Korea have made arrangements for easier business travels between the two countries to facilitate bilateral trade. China is also reportedly pushing for similar arrangements with other countries such as Japan. Also earlier this month, Qingdao in East China's Shandong teamed up with domestic e-commerce platforms to explore a China-Japan-South Korea online free trade zone.
Widespread restrictions on travel and even trade adopted by many countries around the world have posed a serious challenge for the revival of global trade and that will take efforts from more countries to address, analysts said.
"The pandemic seriously impacted global supply… which needs the world to be on the same track to jointly tackle," Liu told the Global Times on Tuesday.