Zamir Ahmed Awan: Unique Chinese economy may recover to pre-virus state

August 13 , 2020

An employee works at an aluminium alloy plant in Wuxing district of Huzhou, Zhejiang province. Wuxing has been promoting high-quality development of the manufacturing industry this year. [Photo/XINHUA]

By Zamir Ahmed Awan, a senior fellow with Center for China and Globalization(CCG)

COVID-19 has spread to almost all countries and nations due to its contagious nature, and has adversely impacted the global economy. COVID-19 is a new virus; there is no cure or vaccine that has been developed for the general public.

As such, prevention is primarily needed to control and curb the virus, with efforts such as using masks, handwashing with soap, the use of hand sanitizers, social distancing and avoiding large gatherings as common measures. These efforts, however, have had an adverse impact on commercial activity, with sectors including education, tourism, travel, catering and entertainment among those hardest hit in the economy.

The global economy has slowed down, with some countries entering recession and a few close to collapse. Even advanced and developed countries have suffered due to COVID-19.

China was the first country to take a blow from COVID-19, but its enormous efforts and focused approach also made it the first country to overcome the virus. China followed a conservative path of comprehensive lockdowns, suspending public transport, closing educational institutions, shutting down businesses, and stopping all kinds of commercial activities. As a result, within two months, China overcame the outbreak and gradually restored itself back to a normal routine.

China has also seen a massive loss on the economic front too, but with the right policies and timely decisions, the harm was not as severe as that of other countries in the world.

The US-China Business Council (USCBC) released its annual member survey report, which captures how American companies view the changing business environment in China, including the country’s economic slowdown, operational challenges and questions about policy direction. “China’s growth slowdown is impacting American company financials and market sentiment. The report shows that nearly 20 percent of respondents expect revenue to decline this year, though two-thirds anticipate continued growth,” said USCBC President John Frisbie.

Surprisingly, despite the political confrontation with the US, most of the American companies were optimistic about the Chinese economy and its growth. A businessperson who may not care much about politics will focus more on net profits. As long as the American companies find China a favorable market, they will keep their businesses in China, regardless of US government politics or anti-China sentiment.

The survey revealed that despite slowing revenue growth, 90 percent of companies surveyed remain profitable, but at reduced rates that reflect increasing competition, rising costs and regulatory impediments. The report also finds that uncertainty about China’s economic reform policies is undermining business confidence. Even so, China remains a priority market for American companies. “Ninety percent of companies say China’s growth prospects are the same or better than other emerging markets,” said Frisbie. “To the American business community, there’s no ignoring the second-largest economy in the world.” Of the top 10 challenges, six would be improved by a high-standard US-China Bilateral Investment Treaty. “I anticipate that the ongoing negotiations on the bilateral investment treaty will be high on the agenda for President Trump’s meeting with President Xi Jinping in early September in China,” said Frisbie.

As a matter of fact, the domestic market of China is enormous; its population of 1.4 billion people is one of its strengths. The purchasing power of the average Chinese individual is much higher than any other nation. The availability of raw materials and the abundance of skilled workers is the real strength of the Chinese industry. The Belt and Road Initiative has also played a decisive role in safeguarding the Chinese economy.

The unique features of the Chinese economy are helping to mitigate the impact of the pandemic and lead to less economic harm, compared to other nations. There is hope that the Chinese economy, which is seeing a rapid recovery, may return to its pre-COVID-19 state.