Get Instant Loan up to ₹10 Lakh!
Bare Talk
The real story of China’s ‘success’ as it welcomes its Year of the Ox
The world erred in copying China’s lockdown and should realize its economy is worse than it claims
On Friday, a new year is born in the Chinese calendar. It is an important festival and holiday period. Last year, the Lunar New Year arrived in January, and the travel associated with it—somehow only to international destinations but not within China—gave rise to a lot of things that the world has endured over the past 12 months. As of now, in some parts of the world, that experience endures. In others, it threatens to return. Some places—like India—appear to have put it behind them. But none can be sure.
China locked down Wuhan and Hubei province to prevent the virus from spreading. Based on publicly available information, by doing so, it appears to have succeeded remarkably in containing the spread of the virus last year. In the process, it exported its lockdown template to the rest of the world last March, starting with Italy. Lockdowns were a non-pharmaceutical intervention (NPI) explicitly rejected by the Center for Health Security at Johns Hopkins University and the World Health Organization in separate reports published in September and October 2019, respectively.
A National Bureau of Economic Research (NBER) working paper, titled ‘Four Stylized Facts About Covid-19’ and published in August 2020, states that a failure to account for those four stylized facts may have resulted in overstating the importance of policy-mandated NPIs for shaping the progression of the deadly pandemic.
In a recent interview, Neil Ferguson, a famous epidemiologist at Imperial College London, told Unherd.com that had China not shown that cities and countries could be locked down, other countries would not have thought of it as an option. The worldwide collateral damage of that precedent is inestimable and still rising. Data will be tallied for years and decades to come.
Another NBER working paper, ‘The Long-Term Impact of the Covid-19 Unemployment Shock on Life Expectancy and Mortality Rates’, published in December 2020, noted the following: “The size of the covid-19 related unemployment to be between 2 and 5 times larger than the typical unemployment shock, depending on race/gender, resulting in a 3% increase in mortality rate and a 0.5% drop in life expectancy over the next 15 years for the overall American population. We also predict that the shock will disproportionately affect African-Americans and women, over a short horizon, while white men might suffer large consequences over longer horizons. These figures translate into a staggering 0.89 million additional deaths over the next 15 years.”
Many commentators—so-called experts and others—have intoned dramatically that there was blood on the hands of their favourite politician who left office on 20 January 2021 for his allegedly bungled policy response to the virus. They could be right about blood on hands, but they are focusing on the wrong ones.
The predictions of Ferguson’s models were dire, contrary to later assertions. They took into account a spontaneous public-safety response to the spreading virus and also lockdown measures. Yet, they predicted a catastrophically high number of deaths in the US and the UK that never materialized, thankfully. His track record on projected deaths from swine flu and the ‘mad cow’ disease is no better. They were equally dire but never materialized. Yet, his covid models drove the decisions of scientists and policymakers in major nations of the West in March-May 2020.
Imperial College London has prided itself on being the academic partner of China in the West. Chinese President Xi Jinping even visited the college in 2015.
On paper, China grew 2.3% in 2020, with its fourth-quarter growth estimated at 6.5%. Its rebound in 2021 is expected to exceed 8%. Analysts behind the China Beige Book have pointed out that its growth in 2020 was achieved through a downward revision of 2019 numbers. In its annual Article IV assessment of the Chinese economy for 2020, published in January 2021, the International Monetary Fund reckons that China’s true fiscal deficit was 18.2% of gross domestic product (GDP) in 2020, and that it would be at 13.8% by 2025. China’s true ‘general government debt’ was 91.7% of GDP in 2020, rising to 112.7% by 2025.
The Asia Society Policy and Rhodium Group collaborate to produce a China dashboard every quarter. The winter 2021 update was released in January. Despite the Asia Society leadership’s close ties with China, the report pulls no punches. The role of state-owned enterprises is resurgent and it says that the party-state was intolerant of private firms becoming too influential.
The dashboard assesses progress on the ‘Sixty Decisions of the Chinese Communist Party’ issued in November 2013. It has consolidated these decisions into 10 clusters. In the seven years since the decisions were put out, according to the dashboard, six have seen reform run backwards (or stalled), on balance, while four have seen some modest advancement.
These form the backdrop to the story of a Chinese economy that has recovered and is poised to wrest leadership of the global GDP sweepstakes from America in the next few years.
V. Anantha Nageswaran is a member of the Economic Advisory Council to the Prime Minister. These are the author’s personal views.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess
First Published:8 Feb 2021, 11:28 PM IST
- Top Gainers
- Top Losers
- 52 Week High