Wednesday, November 25, 2020

The resilience of the Chinese economy

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Editorial of the “World”. In its desire to become the world’s leading economic power, China has undoubtedly just scored some points. It is expected to be the only major economy to continue expanding in 2020, according to projections by the International Monetary Fund (IMF). While the United States and Europe are entangled in a second wave of Covid-19, Beijing, thanks to better control of the epidemic, has returned to growth more quickly.

China’s gross domestic product (GDP) grew 4.9% in the third quarter, according to statistics released on Monday, October 19. Over the year, the IMF forecasts growth of slightly less than 2%, against a decline of 4.3% in the United States and 8.3% in the euro zone. The comparison is cruel.

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Admittedly, Beijing could not avoid a stall compared to 2019 (the GDP had increased by 6.1%). Of course, the numbers in this country are still questionable. Still, the Chinese economy is showing a certain resilience.

If the country bears a major responsibility in the spread of the virus by having hidden from the international community the gravity of the situation in January in Wuhan, the first epicenter of the pandemic, it must be recognized that Xi Jinping’s regime has succeeded in containing the scourge. to restart its economy as quickly as possible. When Europe and the United States deplore tens of thousands of cases of contamination every day, Beijing speaks of a dozen patients.

Lack of social safety net

Beyond the idyllic picture that the regime wants to give, the country did not come out of this period unscathed. Growth remains insufficient to stem unemployment. In the absence of a social safety net, whether in terms of health, retirement or education, millions of Chinese have fallen into precariousness in recent months. There is nothing to say that the recovery in consumption observed this summer will be sustainable, especially as the increase in household debt is taking on worrying proportions.

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From an industrial standpoint, the Chinese economy got back into working order in April. The ramping up of production has enabled China to increase its share of world exports. Taking advantage of containment measures abroad, Beijing has massively exported medical equipment to make up for global shortages, as well as computer equipment, as Western companies switch to teleworking measures. At the same time, the consumption support plans of foreign governments fueled demand for imports from China.

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The revival of China’s trade surplus, which had fallen in recent years, is not without risk. It is likely to feed resentments vis-à-vis a country which still refuses to comply with the rules of international trade. Between the technology transfers imposed on foreign firms, the lack of transparency of public subsidies and the issue of industrial overcapacity which encourages dumping, there are many areas of friction.

Donald Trump’s United States was the first to rebel. Whoever the next US president is, the tension with Beijing is not going to ease on its own. As for the Europeans, they seem ready to part with the naivety they have shown in recent years by speaking more firmly. China is starting again faster, but its relative success could rekindle a trade war that risks taking on a global dimension this time.

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