China’s economy, the second largest in the world, was one of the hardest hit by the coronavirus pandemic. Economic and travel restrictions, lockdowns and other measures to stop the spread of Covid-19 weakened its economy significantly. Despite these struggles, China’s economy is now seen as emerging from the Covid-19 shadow and is poised to become the only major world economy to grow in 2020.
Changes in the Chinese Economy
Steady Economic Growth
The Chinese economy is expected to post annual growth of around two percent for 2020, representing the only expansion of a major world economy this year. This is despite the significant economic fallout from the pandemic, which included a slump in manufacturing, retail sales and foreign investment.
Improved Confidence
The nation’s economic output began to bounce back over the course of the year. This recovery was largely due to government support and stimulus measures, including investment stimulus plans and tax cuts. This has resulted in improved investor and consumer confidence, with business activity and investment in the residential property sector both recovering.
Early Actions to Contain Covid
The Chinese government was amongst the first in the world to take decisive actions in containing the spread of the virus. It moved swiftly to introduce widespread lockdowns and travel restrictions to contain the virus, paying particular attention to quarantining those who had exhibited symptoms. This combined with advances in technology, such as contact tracing applications, enabled it to slow the spread of the virus quickly.
Government Support
The Chinese government has been providing considerable support to its citizens throughout the pandemic. This includes cash payments and loans to small businesses and tax cuts and stimulus packages to offset the economic effects. By doing this, they have created the conditions that have allowed the economy to bounce back from its downturn.
Strengthening Infrastructure
The pandemic has also highlighted the need for China to strengthen its infrastructure. This includes investing in technological developments such as cloud computing, big data, mobile internet and e-commerce. This infrastructure will be crucial for economic growth and development in the post-Covid era.
Domestic Consumption
One positive side effect has been a shift in focus away from reliance on exports and towards domestic consumption. The government has sought to incentivise domestic consumption, offering tax benefits to consumers. They have also invested in digital connectivity, online payment systems and e-commerce platforms, enabling further growth in domestic consumption.
The Chinese Advantage
The timing of the pandemic has worked in China’s favour. Unlike many other major economies, the Chinese economy was in a good position before the pandemic struck. This has enabled it to draw on its existing strengths and strengths in technology, making it well poised to capitalise on a post-Covid economic recovery.
The outlook for the Chinese economy following the pandemic is positive. It has already posted an increase in gross domestic product for the first three quarters of the year and most economists expect it to see further gains in 2021. This has been aided by improved investor and consumer confidence and strong government support. It is well placed to take advantage of a post-Covid recovery and strengthen its position as one of the world’s leading economies.