Economics

What does the future hold for Chinese economy and what does the Kremlin media predict?

21 April, 2020

On April 12, the Facebook page “Politikano” published a post that makes a prediction on the post-coronavirus situation in China. As noted in the post, „analysts and experts suppose that China will be the most operative when entering the post-coronavirus epoch and will further strengthen its economic positions“.

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Such predictions in Georgian social and traditional media are not unique. For example, in an interview given to NEWS FRONT, Arno Khidirbegishvili, the editor-in-chief of the Georgian news agency “Sakinform”, considers China’s capabilities to cope with epidemic to be unique in the world and claims that the country will be able to restore the economy before anyone else. 

Kremlin’s media edition “Sputnik-Abkhazia” repeats the same narrative and in the article headlined “Red virus: Who and how shapes anti-Chinese ideology” develops the idea that China not only „has left the worst behind“, but was the first, who overcame the pandemic, and now is massively reviving its economy and expanding its influence in the world.

As the UN report notes, before the spread of the COVID-19, global economic growth of 2.5% was predicted. However, several scenarios came into focus along with the coronavirus pandemic. In the best-case scenario - if there is less reduction in private consumption, investments and export, especially to the countries of the Group of Seven and China, global growth will fall to 1.2% in 2020. In the worst case, it is expected that global output will contract by 0.9%, instead of growing by 2.5%. 

Experts speak openly about the particular challenges facing China. According to the material published by Marketwatch on March 27, Chinese economy will be doubly affected, since its export-partners suffer from the coronavirus crisis. In addition to the fact that in the first two months of 2020, the country’s economy was almost stopped, which is a great blow for export-oriented industry, demand by export-partners will reduce now due to the same cononavirus crisis, which will further hinder to fully restart the economy. 

Against this background, it is difficult to assume that China will enter post-coronavirus world prepared and will keep on going in a way so that an economic activity will not be affected by the crisis, caused by the COVID-19, especially, when China at this stage largely depends on the developments in the fight with pandemic in Europe and the USA. 

China’s imports and exports decreased significantly in March, which further demonstrates that Chinese economy damage may be double due to demand reduction. For example, export in March decreased by 6.6%, while import- by 0.9%. Li Kuiwen, the representative of China’s Administration of Customs, noted that „With the spread of COVID-19 in the world, global economy is under a great deal of pressure. Many uncertainties occur. China’s foreign trade faces significant challenges, he said. In addition, as the World Trade Organization noted in the beginning of April, the world trade is expected to decline by 32% in 2020, due to the pandemic caused by the coronavirus.

According to the National Bureau of Statistics China, Chinese economy could improve in the second quarter, since businesses are returning to a normal regime. However, according to analysts, economic revival will be a weak process, taking into account that unemployment level in China has significantly declined, which for its part, will reduce consumer spending and, in addition, global spread of the virus will sufficiently limit export whether or not factories and enterprises return to normal operation. Unemployment rate in China jumped to 6.3% in February in contrast to 5.2% in December 2019. 

It should be noted that following the COVID-19 crisis, when supply chain between the two main trade partners almost broke, Japan announced allocation of the record-size economic stimulus package, USD 2.2 billion, to help producers get their production out of China. Along with Japan, several large companies, such as, for example, Apple, Google and Microsoft have also announced plans to get their production out of China to the countries, such as Vietnam and Thailand. European companies are preparing to leave Chinese market. According to the results of the survey conducted by the Quality Control and Supply Chain Audits (QIMA), 67% of European companies are thinking about leaving China. 

““Myth Detector” contacted Ioseb Berikashvili, dean of the Caucasus University School of Economics, for comment. According to Berikashvili, in such a situation, China is not as reliable partner as should be, and in the post-crisis period, producers will start looking for alternative markets.

Soso Berikashvili: “In today’s world, there is increasing talk that in post-coronavirus and post-crisis period, people, producers, businesses, countries will start looking for other places, where they can produce... to the South, in South Asia, in India, for example, and its neighbour countries. There is a great resource to develop manufacturing industries since there is cheap labor. There was also talk, and by the way, very logical talk about Mexico, which is close to America, for instance, and is more likely to use. In any case, any sane and logical person understands that this everything is not good for China.”

The economist underlined that it is almost impossible to make forecasts over this crisis, since its cause is not economic.


Prepared by Nika Shekeladze
Myth Detector Lab