BEIJING – As most of the world is still struggling with the coronavirus pandemic, China is once again showing that a rapid economic rebound is possible once the virus is brought under control.
The Chinese economy grew 4.9 percent in the quarter July to September compared to the same months last year, the country’s National Bureau of Statistics announced Monday. The robust performance brings China almost up to the around 6 percent growth rate it reported before the pandemic.
Many of the world’s largest economies have climbed rapidly out of the depths of a contraction last spring as shutdowns caused production to fall sharply. But China is the first to report growth significantly surpassing where it was at this point last year. The United States and other nations are also expected to report an increase in the third quarter, but they are still lagging behind or are just catching up before the pandemic.
The sharp expansion of the Chinese economy means it is set to dominate global growth – accounting for at least 30 percent of the world’s economic growth this year and in the years to come, Justin Lin Yifu, a cabinet adviser and honorary dean of the National School of Development at Peking University, said at a recent Intergovernmental Conference in Beijing.
Chinese companies account for a larger share of world exports, manufacturing consumer electronics, personal protective equipment and other goods that are in high demand during the pandemic. At the same time, China is now buying more iron ore from Brazil, more corn and pork from the United States and more palm oil from Malaysia. It has in part reversed a nose deep in commodity prices last spring and softened the impact of the pandemic on some industries.
Yet China’s recovery has done less to help the rest of the world than in the past, because its imports have not increased nearly as much as its exports. This pattern has created jobs in China but slowed growth elsewhere.
China’s economic recovery has also been dependent for months on huge investments in highways, high-speed rail lines and other infrastructure. And in recent weeks, the country has seen the start of a recovery in domestic consumption.
The wealthy and people living in export-oriented coastal provinces were the first to start spending money again. But activity is now resuming even in places like Wuhan, the central Chinese city where the new coronavirus first emerged.
“You have had to line up to get into many restaurants in Wuhan, and for Wuhan restaurants that are popular on the Internet, the wait is two or three hours,” said Lei Yanqiu, a Wuhan resident in her early teens. 30s.
George Zhong, a resident of Chengdu, the capital of Sichuan province in western China, said he had made trips to three provinces in the past two months and has been actively shopping when he is at home. “I spend no less than in previous years,” Zhong said.
China’s economic growth over the past three months came slightly below economists’ forecasts of 5.2 percent to 5.5 percent. But the performance was still strong enough for stock markets in Shanghai, Shenzhen and Hong Kong to rise in early trading on Monday.
The country’s growing recovery could also be seen in economic statistics just for September, which were also released on Monday. Retail sales rose 3.3 percent last month from a year ago, while industrial production rose 6.9 percent.
China’s model for restoring growth may be effective, but may not be appealing to other countries.
China is determined to keep local transmission of the virus at or near zero, and has resorted to extensive cell phone tracking of the population, week-long lockdowns in neighborhoods and cities, and expensive mass testing in response to even the smallest outbreaks.
China’s rebound also comes with some weaknesses, especially an increase in total debt this year by an amount equivalent to 15 to 25 percent of the economy’s total output. Much of the extra debt is either loans from local authorities and state-owned enterprises to pay for new infrastructure, or mortgages taken by households and businesses to pay for apartments and new buildings.
The government is aware of the risk of letting debt accumulate quickly. But resuming new credit would hurt real estate activity, a sector that represents up to a quarter of the economy.
Another risk to China’s recovery is its high dependence on exports. The increase in exports over the last three months, together with lower prices for imports of raw materials, accounted for a large part of economic growth, one of the largest shares in any quarter of a decade. Exports still represent over 17 percent of China’s economy, more than double the share they make up in the U.S. economy.
China’s leaders recognize that the country’s exports are increasingly vulnerable to geopolitical tensions, including the Trump administration’s move to end trade relations between the United States and China. Changes in global demand could also threaten exports as the pandemic slaughters the overseas economies.
Xi Jinping, China’s top leader, has increasingly emphasized self-reliance, a strategy that calls for the expansion of the service industry and innovation in production, as well as enabling residents to spend more.
“We need to turn consumers into pillars,” Qiu Baoxing, a cabinet adviser who was previously deputy minister for housing, told a news conference in Beijing. “By focusing on domestic revenue, we are actually improving our own resilience.”
But empowering consumers has long been a challenge in China. Under normal circumstances, most Chinese are forced to save for education, health care and pensions due to a weak social safety net. The economic downturn and pandemic have meant job losses and have exacerbated the problem, especially for low-wage earners and rural residents.
Beijing’s approach to helping ordinary Chinese during the downturn has been to give companies tax rebates and large loans from state-owned banks so companies do not have to lay off workers. But some economists argue that Beijing should instead hand out coupons or checks to more directly help the country’s poor citizens.
Millions of Chinese migrant workers endured at least a month or two of unemployment in the spring as factories were slowly reopening after the epidemic. Young Chinese found themselves dipping into their savings to eat or taking on other jobs to compensate for cut wages.
But Chinese government economists are cautious about providing direct payments to consumers. They say government priorities are investment-driven growth and measures to improve productivity and quality of life, such as digging up new sewer systems or adding elevators to three million older apartment towers that are lacking them.
“We have seen many proposals to increase consumption, but the key is first to enrich people,” said Yao Jingyuan, a former chief economist at the National Bureau of Statistics, who is now a political researcher for the cabinet.
Western governments have experimented with providing extra large unemployment checks, one-time payments and even subsidized meals at restaurants. These payments have been aimed at helping families maintain a minimum standard of living through the pandemic – which in turn has created demand for imports from China.
Michael Pettis, a finance professor at Peking University, said that while people in other state-backed countries continue to turn to China for products during the pandemic, “we will see a resurgence of trade conflict and not just US China, but globally. ”
Liu Yi and Amber Wang contributed research.