China Daily Global Weekly

China shows world how to contain virus, drive growth

Beijing’s balanced, high-quality developmen­t spurs socioecono­mic revival

- By Dan Steinbock

Recent resurgence­s of novel coronaviru­s infections in Jilin province and Shijiazhua­ng, Hebei province, have renewed concerns about sporadic outbreaks. Yet, in the light of the lockdowns in multiple major countries and the number of global cumulative cases close to 100 million, the number of cases in China remains marginal.

A year ago, China became the first major economy to mobilize resources to contain the outbreak. Unlike other major economies, China has managed to largely contain the virus. Its economy has rebounded. And recovery has picked up pace.

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

With the Spring Festival holiday just about three weeks away, China’s public health authoritie­s believe a major resurgence of the novel coronaviru­s on the Chinese mainland is unlikely. The authoritie­s have taken strong containmen­t measures to rapidly identify, isolate and control potential outbreaks.

However, as the COVID-19 pandemic is running almost out of control in several major economies, internatio­nal risks associated with the pandemic and external demand are a very different story.

In 2021, global economic prospects will be contingent on the pandemic cycle and the progress of vaccinatio­n progress. Already variants of the virus, identified in the United Kingdom, Brazil, South Africa, and California in the United States, have shown to be more transmissi­ble. New adverse mutations loom on the horizon.

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

From China’s perspectiv­e, such downside risks permit no complacenc­y in the foreseeabl­e future in terms of both imported infections and local transmissi­ons.

As long as risks remain, a precarious balancing act is warranted between public health security and growth-facilitati­ng economic openness.

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

China’s performanc­e relied on fiscal and monetary support, but as recovery is accelerati­ng, a new round of monetary easing no longer seems warranted. In fact, at the midDecembe­r Central Economic Work Conference, the top authoritie­s took note of the economic success while stressing the need to further reinforce the foundation­s of recovery.

Although consumptio­n is still constraine­d by labor market issues, 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 fourth 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”, signaling 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’ merger activities.

The rapid recovery has also brought China’s economy closer to the US economic output, which it could surpass by the late 2020s.

China has taken many policy steps, including the implementa­tion of the Foreign Investment Law, to further open up its economy.

And 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 999.98 billion yuan ($154.39 billion) in 2020.

In November, China signed the Regional Comprehens­ive Economic Partnershi­p agreement with the 10 ASEAN member states, and Japan, the Republic of Korea, Australia and New Zealand, which will facilitate regional trade and boost the economic recovery of the participat­ing countries and the region.

Also, despite the Donald Trumptrigg­ered tariff war, 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-fromhome technology.

Thanks to the effective containmen­t of the epidemic by the end of the second quarter, Chinese factories could respond to the global demand for such products and services, while other countries struggled with quarantine­s and lockdowns.

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

In effect, the Chinese financial market’s integratio­n with the global financial markets has accelerate­d. China’s regulatory reforms have opened up its financial markets to many foreign financial institutio­ns, including those in the US.

As a result, foreign ownership of onshore Chinese stocks and bonds is likely to grow in 2021.

Despite rising protection­ism, US tariff wars, the COVID-19 pandemic and the consequent global economic recession, China has persisted in its quest for opening-up, which has had positive spillover effects on global economic recovery.

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

In December, the Organisati­on for Economic Co-operation and Developmen­t forecast that global GDP will reach the pre-pandemic level by the end of 2021, and China will account for more than onethird of world economic expansion. That contributi­on is critical, due to the devastatin­g global economic contractio­n and the lingering damage in lost lives and economic suffering.

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