Daily Management Review

China’s Economy To Rebound After First Quarter Contraction Due To Viral Pandemic


China’s Economy To Rebound After First Quarter Contraction Due To Viral Pandemic
According to analysts, following contraction in the Chinese economy in the first quarter of the current year because of the coronavirus pandemic, it should recover and do well for the rest of the year.

According to data released last Friday by China's National Bureau of Statistics, there was a 6.8 per cent year on year contraction in the Chinese economy during the first quarter because of the lockdowns and closure of factories to prevent the spread of the novel coronavirus pandemic in the country.

But according to Jeffrey Sachs, a renowned economics professor at Columbia University and a senior United Nations advisor, there will be a significant recovery in the GDP of China in the second quarter which is expected to remain for the rest of the year.

Sachs said that factories in China have started production again while daily life is slowly moving to a "new normal" even though certainly not back to the old normal.

"China's economic recovery will ultimately depend on the success of a large part of the world overcoming the epidemic in a cohesive manner," he said.

China should "work very closely with the Asian neighbors" to create a region in which "COVID-19 is strongly under control and trade is resumed," suggested the US economist. He added that revival of East Asia should be the first priority because it is the manufacturing center of the world economy.
He also said that the same should be attempted to be done by China for Africa and the Middle East through coordinating with governments and agencies in countries of the region. He added that China should also try to cooperate with Europe and the United States on the recovery.

"The gradual but substantial recovery" in electrical power usage in China is "strong evidence" of the recovery of the manufacturing sector in the country, Nicholas Lardy, senior fellow at the Washington D.C.-based think tank Peterson Institute for International Economics (PIIE), had  recently noted.
China's manufacturing recovery will not be stopped or halted by weak export demands for the products manufactured in China, argued Lardy, who co-authored an analysis with PIIE research analyst Tianlei Huang.

"While the weakening global economy will constitute a headwind, the pace of China's domestic demand is likely to be the most important factor determining the pace of recovery of China's manufacturing sector," Lardy said.

On the other hand, according to the International Monetary Fund (IMF)'s recently released World Economic Outlook report, one of the few major economies that could see economic expansion this year included China, even as the report predicted a 3 per cent decline in global growth for 2020.
According to the report, while the growth rate in the so called advanced economies are expected to contract by 6.1 per cent for the current year, there will be only 1 per cent predicted shrinking in the economies of the emerging market and developing countries which typically have growth levels well above advanced economies.