Chinese economy grows by 5 per cent in Q3

While other major world powers struggle in the face of the novel coronavirus pandemic, China and its economy—though initially taking a battering as the epicentre of the contagion—are flourishing after months of strict sacrifice. (Photo: World Economic Forum)

By Al Edwards

Where the United States and other western countries have seen their economies shrink and unemployment rising, China powers ahead registering 5 per cent growth in the third quarter (year on year).

In the April to June quarter, when the outbreak gripped the world, China’s economy grew by 3.2 per cent as it looked to ramp up production and drive up its exports. It also actively encouraged foreign investments.

The International Monetary Fund (IMF) is reporting a decline in the world’s economy, the only bright light it sees is China, where it is projecting overall growth of 2 per cent this year. To put this in context the U.S. economy is expected to fall by 4.3 per cent this year.

With China’s industrial production up by 6 per cent this quarter over the same period last year, the country’s unemployment figure has declined to 5.4 per cent for the present quarter. At this point in time, US industrial production has declined to its lowest since COVID took hold in March this year.

Using the measurement of Purchasing Power Parity (PPP),the IMF  according to its recently released World Economic Outlook report, China is now the world’s largest economy at US$24.2 trillion  compared to America’s $21.trillion.

The decline of the world’s GDP due to the coronavirus will not be as damaging as earlier estimated, with the IMF predicting a fall by 4.4 per cent and not the 5.2 per cent figure projected in June. This is due in part to the growth of the Chinese economy.

Speaking at the IMF’s World Economic Outlook press briefing held earlier this month, the multi-lateral agency’s Chief Economist, Gita Gopinath said: “ In 2021 world economic growth is projected to rebound to 5.2 per cent slightly below our June projection. Now except for China where output is expected to exceed 2019 levels this year, output in both advanced economies and emerging and developing economies are projected to stay below 2019 levels well into 2021.”

Chief Economist at the Washington D.C.-based IMF, Gita Gopinath. (Photo: World Economic Forum)

According to the latest IMF World Economic Outlook Growth projections, China is expected to grow by 8.2 per cent in 2021 whereas the U.S. is expected to grow by just 3 per cent next year. Latin America and the Caribbean is projected to grow by 3.6 per cent next year.

China moved to combat the COVID-19 outbreak quickly, imposing mass-testing, quarantines and lockdowns. Its people were compliant which has allowed the country to see the back of the worst of the virus. This has seen the economy bounce back and meet pent up demand across the world, while other economies have substantially reduced their production output.

The US has not adopted a national approach to fighting the virus and with President Trump not taking a strident stance on mask-wearing, personal protection and other safeguards, a second wave could well envelope the US. Europe is now seeing a spike in its numbers again as it prepares to enter the winter months.

UBS’s Chief China Economist Wang Tao speaking with Bloomberg said: “China’s recovery has continued in the third quarter and especially with domestic retail consumption sales picking up, I think that bodes well with continued recovery in the fourth quarter and the next year as well.”