Being the first country to be affected by the corona virus pandemic, to the point that some are blaming it for its responsibility, China was the first one to emerge from the sanitary crisis, even if some clusters are reappearing, and to regain, before the other major developed countries, a growth rhythm which will allow it to quickly erasing its economic consequences. We know the skepticism what statistical data generally arouse and the comments which accompany the declarations of Beijing leaders are most of the time critical. Yet the prestigious medical review, the Lancet, has just published an unequivocal study about the Chinese authorities success to contain the pandemic and to impeach a second wave to which, France, as other countries, are today confronted with, to occur.
The most important point lays in the rapidity with which authorities have reacted. As soon as at the beginning of February, very constraining dispositions were imposed to the population to contain the transmission of the virus which appeared in the center of the country, in Wuhan, one of the country industrial centers. In France, when the threat had been identified for more than a month, we have waited March 11th to decide the confinement, and to the difference to China, we didn’t have at our disposal any masks and any tests to fight against the transmission of the virus. The frequently authoritarian character of the regime, which is frequently denounced, has helped to impose the measures which were unpopular but which have proved they were efficient, and that, in accordance with local authorities which have acted like a driving belt of the decisions taken in Beijing. If we add to the special political context the natural predisposition of Chinese people to a kind of discipline, we better understand why the analysis published in the Lancet have some credibility. According to official statistics, there was yet 85 000 persons who were affected by the virus, so less than in France, which has a population twenty times less numerous.
Another indicator is revealing. China has just celebrated its National Holiday and inhabitants had a vacation week, the “Golden Week”. The Lunar New Year which most of the time occurs in February gives the opportunity to families to gather, most of the time in rural areas at their senior homes. But vacations during the Golden Week, are dedicated to tourism. This year, accounted travels reached more than 637 million, clearly under last year ones which reached 782 million. But this result is quite remarkable because it confirms the pandemic decline. If there had the smallest risk in travelling in the country, there are no doubts that authorities would have controlled, if not restricted, them and, at least, families would have been much more reluctant with the idea of travelling. On this issue, comparison with Europe is striking. It gives also a valuable indication on the fact that Chinese consumers are not hesitating to spend even when there is no obligation. A kind of trust is back, which is a definite guarantee regarding the economic rebound.
We will have a first estimation of 3rd quarter growth before the end of the month. During the last three months, industrial production grew by 5% compared to last year corresponding months. During the first eight months of the year, power consumption recovered the same level than during the previous year, as retail sales to consumers and enterprises investment. Everything is like if the sharp trough of the 1st quarter has been filled up. Inflation is moderate (2.5% as an average on annualized rate for the last three months compared to last year same period) but real estate investments remain on a high growth trend (+4.6% during the first eight months compared to last year same period).
Financial markets didn’t ignore that. The main Shanghai index, the CS300, rose by 17% since the beginning of the year and the Shenzhen one, where are listed Chinese high-tech companies did almost as well as the Nasdaq (+29%). During that time, Paris and London retreated respectively by 17 and 19%. The Dow Jones and Frankfurt have recovered the level of the beginning of the year but, in this last case, it is because the DAX is calculated with dividends integration. Without that, if would have fallen by near 5%. The situation is the same on foreign exchanges markets where the Yuan has increased by 5% since March against the dollar. Shanghai and Shenzhen stocks markets have multiplied agreements with foreign markets to facilitate transactions. The Chinese currency slowly achieves its internationalization process but it is still far from being able to compete with the dollar and the euro.
Chinese monetary policy remained very classical with interest rates above zero and a sloping yield curb, to the opposite of Western markets where negative rates and flat curbs are the rule. On these issues, Chinese banks have an advantage, especially in front of their European competitors. The activity support through budgetary policy is less notable than in Europe for instance or especially than in 2008 when Beijing had to cope with the sub-primes crisis. The point is rather put on the economy liberalization with the progressive suppression of the restrictions regarding foreign investments and on energy transition. The recent commitment of the Chinese president about carbon-neutrality at last in 2060 must not be underestimated. The purpose is not to differ with the American position which is going in the opposite direction to attract the support of the international community but from the waking up to the fact that the Chinese growth model must be reformed, must become less energy-consuming and less dependent from its exports.
The “new cold war” with the U.S. has not more harmed Chinese growth, even if it penalizes several big companies which had acquired a leading position in new technologies. The main reason is that what is reproached to the country, its huge exports, is mainly due to international companies which have delocalized a share of their supply chains in the country. It is an illusion to believe that they are going to adopt a different strategy from one day to the day after. The result of the American elections, despite that, constitutes a major issue for the short term evolution of the Chinese economy. If Donald Trump is re-elected he will feel he is protected against any national political constraint since it will be his last mandate and he might harden his policy. That will re-launch an uncertain climate and it is good for nobody. To the opposite, if Joe Bidden is elected it is sure that we will see a de-escalade of the tensions between the two countries and that will be favorable to the Chinese economy, of course, but also for the major American companies which won’t be any more under the threat of having to completely reexamine their strategies.
The always pessimistic and negative presentation which is made in France about China is not based. It doesn’t incite our enterprises to interest themselves to this market. It is regrettable, if we see the place the country is occupying in the world economy. At a time when the train of the recovery is starting, they do risk to stay on the departure platform.