Macroscope | China’s economy is recovering from the coronavirus, but don’t expect it to ‘save’ the global economy

The latest data gives confidence that China’s economy should slowly return to normal by the end of the year. But developed economies’ recovery won’t mirror China’s

Beijing’s priority is to steady the economy. It’s likely to favour measured support over any large-scale stimulus that could risk its financial stability

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Employees work on a production line at a Dongfeng Honda factory after the lifting of the Wuhan lockdown on April 8. Photo: Reuters

Published: 5:00pm, 29 Apr 2020Updated: 10:25pm, 29 Apr 2020

It seems natural that economy-watchers would look to China for clues about other economies’ recoveries from the Covid-19 pandemic. China appears to have moved past the worst of the coronavirus outbreak, and economic activity is bouncing back.

The world’s developed economies, meanwhile, are just a calendar year quarter behind China in envisioning how and when to relax disease-containment efforts that have stifled activity.

Extrapolating outlooks for developed economies from China’s experience is unlikely to reveal a true picture, however. The economic structures are simply too different, and I believe the pace of recovery will thus differ significantly.

Although China’s economy should return to normal by the end of the year (assuming that there is no significant second wave of infection), it may take three or four additional quarters before developed economies return to normal, likely towards the end of 2021.

Data released on April 17 by the National Bureau of Statistics of China confirmed two of our expectations for the outbreak’s impact on China’s economy.

First, the first-quarter contraction in growth would be deep: sure enough, gross domestic product fell 6.8 per cent compared with the first quarter of 2019.