As the Coronavirus crisis engulfs the world, China with its tarnished images is facing multiple headwinds. There are clamors in foreign countries for China's accountability and even reparations, harking back to China's past humiliations at the mercy of foreign aggressors. While China is the first to recover from Covid-19, its slowing economy has taken a massive battering. Alarm bells are ringing about the millions of jobs lost which are unlikely to return anytime soon.
Amid the doom and gloom, it is easy to lose sight of reality. According to an IMF update of 14 April, global economic growth this year is expected to drop to minus 3%. China and India are the only countries able to register positive growth, at 1.2% and 1.9% respectively. The American economy is expected to contract by 5.9%. Next year, China's economy is forecast to rebound vigorously by 9.2%, compared with India's 7.4% and the U.S's 4.7%.
A TIME article of 14 May speculates how How China Could Emerge Even Stronger After COVID-19 . Against this rosy prediction, many parts of China's economy remain ensnarled by grave disruptions in the global supply and value chain where China is a central hub. Additionally, the global chain is being de-Sinicized, according to a research note of 3 June, 2020 by BBVA, a French bank. As a result, China may lose 1.6% of its GDP annually.
The research notes that most productions moving away from China are in labor-intensive sectors such as textile, footwear, wood plus labor-intensity parts of high-tech industries such as optical devices etc. However, labor-intensive operations have been moving away from China for years. This is a phenomenon of China's rising wages and other costs as much as its strategy of industrial upgrading. As long as such movements are offset by industrial higher value-added processes,such as robotics, and new employment is created in advanced manufacturing and in the services sector, the overall outcome may not be all negative.
On the other hand, the US economic outlook appears less than robust while the Fed's massive money-printing doesn't seem to turn things around in the real economy. If China manages to restore steady growth over the coming years, it begs the question whether China may be able to overtake the US economy sooner than expected, say, before 2030?
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