Home / News / World /  China’s growth story contradicts global shrinkage

Ever since news of the coronavirus outbreak emerged in Wuhan, many have been sceptical of the statistics being put out by China. Speculations over China being the only major economy to grow are being taken with a pinch of salt by experts. Mint explores the issue.

How did China respond to covid-led lockdown?

China, the world’s second-largest economy, was the first country to be hit by the coronavirus. The Chinese government responded by completely shutting down nearly half of the country at the beginning of February. The lockdown was imposed with the intention of containing the spread of the virus and allowing for steps to be taken so that economic activity could resume once the virus situation was under control. The lockdown resulted in a 6.8% contraction in gross domestic product (GDP) as businesses were shut and there was limited economic activity in the first quarter of the calendar year.

What about post-curb recovery in economy?

The lockdown in China was not as prolonged as in other countries and businesses were allowed to reopen March onwards. Thus, the lockdown in the country lasted only for a brief period of the first quarter. Many people are still sceptical of the official figures put out by the Chinese government about the growth in the number of covid-19 positive cases. After economic activity resumed in the country, China’s GDP grew by 3.2% in the second quarter of the calendar year, suggesting a swift economic recovery. Part of this could also be because of the restoration of supply chains and the restocking of inventory.

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What about contribution of foreign trade to China?

China has grown despite a contraction in the global economy, which should have a substantial impact on China’s exports.

The contribution of exports to China’s gross domestic product has dropped from 26.17% in 2010 to 17.39% in 2019. This suggests the gradual reduction in the importance of exports to China’s economic growth.

What bearing do curbs elsewhere have?

China’s share of exports as a percentage of GDP may have come down, but it remains an important part of the global value chain and thus subject to greater volatility. This volatility could take place because of fresh lockdowns being imposed in different parts of the world, which will have an adverse impact on their respective economies and on global growth. Moreover, the recovery in China has been in specific regions and primarily in the manufacturing sector as the services sector continues to struggle.

Has China decoupled from global economy?

Many suspect China has decoupled from the global economy, as it grows even as the global economy contracts. Others caution about such assessment as they point to the role still played by China’s manufacturing sector in global value chain. Fresh curbs could stall recovery as supply chains will be disrupted again and this would add fresh uncertainty for small and medium manufacturing firms in China. Greater global integration prevents decoupling of any country from the global economy.

Karan Bhasin is a policy researcher

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