China model stands up to pandemic test

Pointing to 'extraordinary recovery', experts expect more economic gains

China's skillful management of its COVID-19 outbreak, enabling it to emerge as the only major economy to grow in 2020, shows that the China model works for the country, experts say.

At last month's Central Economic Work Conference in Beijing, the country's leadership agreed that 2020 was an "extremely unusual year" in the history of the new republic since 1949 as a result of the COVID-19 pandemic, and China has now become "the only major economy in the world to achieve positive growth".

"The key message coming out of the conference is that China has managed to maintain stability in an unstable world," said Ben Cavender, managing director at China Market Research Group. China would like to clearly make the point that its model of economic stewardship is the correct one for the country, he added.

His view is echoed by Stephen Perry, chairman of The 48 Group Club, an independent business network committed to promoting trade and cultural links between the UK and China.

Perry said that China, like many other nations, has suffered a severe economic imbalance, but it underwent rectifications. China's recovery is extraordinary.

He said many nations have had more difficulties because they expected the pandemic would not be so bad and that it would ease. In contrast, "China prepared for the worst and worked for the best", Perry said.

Although China suffered a record-setting steepest dive in quarterly economic performance and subsequent surge in the first and second quarters of 2020, respectively, the world's second-largest economy is now benefiting from a return to near normalcy. This, in turn, fueled the strong economic rebound. That's all thanks to the country's quick and decisive response at the onset of the pandemic.

According to the Organization for Economic Cooperation and Development, or OECD, China is projected to record real GDP growth of 8 percent in 2021 and 4.9 percent in 2022. In the OECD's recent economic outlook, the Paris-based international organization said China was expected to account for more than a third of world economic growth in 2021.

China's Purchasing Managers' Index came in at 51.9 for December, the third-highest reading for last year after it hit a three-year high in November. The late-year performance in the gauge of manufacturing activity shows that the economic recovery is well underway.

In a move to chart the course for the economy in 2021, Chinese leaders outlined key missions at the conference, including strengthening the national strategic technologies, enhancing the independent ability to develop industrial supply chains, and upholding the strategic keystone of expanding domestic demand.

Repositioning

Chris Rudd, deputy vice-chancellor and head of the Singapore campus for Australia's James Cook University, said: "China's repositioning as a middle-income country enables its leaders to leverage the growth from increasing domestic consumption to reset its supply chains, focusing domestically on those strategic technologies which will underpin its future development, especially in the tech industries.

Analysts say the trade war initiated by the United States, along with the COVID-19 pandemic, has pointed to China's need to further push economic sustainability initiatives, as well as initiatives that accelerate investment into key sectors where China has traditionally been reliant on other markets.

Cavender, of China Market Research Group, said, "I think we will see heavy investment into sectors that China deems to be critical to the country's long-term success … We are also likely to see policies in place to foster domestic travel and domestic consumption in a bid to capture more spending capacity of Chinese consumers."

Jim O'Neill, a leading British economist and chair of the international think tank Chatham House, said: "The absolutely crucial part of all of this is for China to maintain growth into 2021 driven by domestic demand, especially its consumer."

"If this fails, and the consumer retreats, then Chinese growth will have much more difficult challenges, especially in terms of sustainability," said O'Neill, who is known for coining the term BRIC in 2001 to refer to Brazil, Russia, India, and China as four rapidly emerging economies that symbolize the shifting balance in the global economy. South Africa was added to the group in 2010, making it BRICS.

According to O'Neill, when the BRIC acronym was coined, China's GDP then was smaller than that of the UK, but today it is some 6 to 7 times larger, and it is nearly 3 times larger than Germany, and twice of Japan..

O'Neill said that while it is not clear whether China's strong economic growth will be sustained after 2030 as a result of population ageing and a decline in the labor force, but in the coming decade, it is most likely to see its share in world GDP rise further.

"What it means in reality beyond the average of all countries, will depend on how strong the consumer in China is, and what China imports from the rest of the world," he added.