• InduQin

China's economic bounceback can be a model for world economies


For those used to seeing China's economy grow faster than virtually any other in the world, its 6.8% contraction in the first quarter may have come as a shock.


The country's economy has not looked so bad since Chairman Mao Zedong died in 1976. Yet even amid the gloom of the coronavirus pandemic, there are already some signs of momentum returning.


Assuming the authorities can keep COVID-19 under control, a focus on appropriate fiscal and social policies should help China avoid recession and even enable a strong economic recovery for the balance of 2020. But it will not be easy.


Although the global financial crisis that begin in 2007 started elsewhere, China's economy took a severe blow then. In response, the government engineered a giant economic stimulus plan that ended up swelling China's annual gross domestic product to become the world's second largest and helped the U.S. and other economies to climb out of recession.


Timing is on China's side in recovering this time from COVID-19. The first to face the pandemic in January, China's forceful lockdown and strict quarantines swiftly brought the contagion under control within its borders.


As a result, most provinces began reopening for business in March. Consequently, indicators including retail and property sales and purchasing managers' indexes improved markedly that month from February's dismal readings. With social and transport controls continuing to loosen, this momentum should continue across the April-June quarter.


The sharp contractions facing economies around the world triggered by COVID-19 are different from typical business-cycle recessions, which are usually caused by a gradual drying up of demand.


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