China's Economy Bounces Back As Pandemic Is Brought Under Control
With the coronavirus pandemic still raging globally, China will be the only major economy in the world to post positive growth this year.
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China announced today that its economy grew 4.9% in the latest quarter. It may be the only major economy to expand this year, having recovered from the pandemic while the rest of the world deals with continued lockdowns. NPR's Emily Feng has been looking into what China's economic recovery means for the rest of the world.
EMILY FENG, BYLINE: On a recent October afternoon, I visited Thinova's assembly lines in southern Zhejiang province. Various machine presses and quality control machines clack away.
JEN AMBROSE: Yeah, kind of sounds like a Nine Inch Nails song.
FENG: That's Jen Ambrose, one of the engineers at Thinova, which makes rare Earth magnets, the sort that go into the sensors for your car or help operate your iPhone. Thinova, like the rest of China, is back to work. Construction, manufacturing and automobiles are all booming, and that's good business for Thinova, which mostly sells to North American car plants. Here's Vice President Xue Yue.
XUE YUE: (Through interpreter) Consumer demand is down, but because of the uncertainty about whether there might be a second wave, our clients in North America have been stocking up on our components.
FENG: Back in February, Xue Yue got production going in the middle of China's outbreak. He had to negotiate with dozens of villages to let his workers out of lockdown and come back to work. The pressure to keep supplying his multinational clients was huge.
XUE: (Through interpreter) It was like a war. Our director told us, in critical times, if you cannot hold up your end, I'll just find someone else to replace you.
FENG: Extensive testing and contact tracing have restarted China's economy despite smaller ensuing outbreaks. And so economists estimate China's yearly GDP growth could be north of 2.5% this year, even as the rest of the world's economy will shrink by at least 4%. That differential will give Chinese companies more market share and greater economic influence.
LI XINCHUANG: (Through interpreter) Global steel production dropped, so China's share of production can only rise. I estimate this year China will be at 60% of global steel production.
FENG: This is Li Xinchuang, the president of a state industry group.
LI: (Through interpreter) In June and July, only China was buying steel because our automobile and construction sectors quickly recovered.
FENG: And because China's economy has recovered earlier and faster than that of others, including the U.S. economy, its trade surplus this year will widen even more. Michael Hirson, China lead at consultancy Eurasia Group, says that will exacerbate long-running accusations China benefits more from the global economic order.
MICHAEL HIRSON: The fact that China is back up and running smoothly, and in fact, some evidence suggests that China is actually grabbing market share in export industries, will be a cause of concern for U.S. policymakers in particular.
FENG: Last year, a trade war and a difficult operating environment led some American businesses in China to consider moving some of their supply chains out. But this year, the American Chamber of Commerce in Shanghai's latest survey found more than 78% of respondents have no plans to move operations.
HIRSON: What you're seeing now is basically China's stability premium kicking back in, in the sense that companies now are dealing with a global pandemic, and many of the places that they would move production to aren't looking so rosy right now.
FENG: But China's economic recovery does have its weaknesses. Here's He Wei, an economics analyst at Beijing research firm Gavekal Dragonomics.
HE WEI: Overall, it's still an investment-driven story, and where we'll have seen - what's lagging behind is mainly the consumption, especially for lower-income people-related consumption.
FENG: Meaning there's been growth because China is building bigger factories and more houses and making more cars - but consumer demand has been weaker. And unlike many countries, including the U.S., China has not given cash payments to its lowest-income wage earners, many of whom have not been able to find work after the pandemic. And that could further throw supply and demand out of sync.
HE: Because that inequality will widen again and will weigh down the consumption growth.
FENG: But for now, China is doing all right. The question is how long it can keep it up. Emily Feng, NPR News, Zhejiang, China.
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