Why China’s Economy Is Back on a Growth Path

China’s economic recovery is making headlines. At the beginning of the COVID-19 pandemic, the Chinese economy suffered greatly and contracted by almost 7%. However, in the second quarter, China managed to find its way back to its former growth path, making China the first major economy to grow since the outbreak of the virus. In the second quarter of 2020, the country reported a 3.2% expansion after lockdown measures eased and factories and stores reopened. 

The Reality of China’s Current Situation

While the Chinese economy is growing, it is still nowhere near the pace it was growing at before the pandemic. In fact, the number of extremely poor rural residents in the country fell from 56 million in 2015 to less than 5.5 million last year. This is an enormous success that portrays how fast China has grown in the past decade

Considering that China used to grow at a rate above 6%, 3.2% is significantly less and the weakest positive figure the country has reported since the early 1990s. Thus, it is not a miracle, but rather a slow recovery from the damages caused by the pandemic. 

The second aspect to keep in mind is that the pandemic first began in China, long before it reached the West. Hence, the lockdown started much earlier, and by March, when the crisis had reached other countries, the Chinese leadership already had the disease under control.

Back on the Growth Path

Although China’s growth in the second quarter is not immense, it still puts China back on track. Economists believe that China was likely to recover faster than other major economies because the government had imposed more intensive lockdown measures than other nations. During the height of the pandemic, trade and travel were suspended, and access to areas with a dense population of more than 60 million people was also not allowed. Manufacturing has significantly contributed to China’s recovery as well, and the economy has gone back to work.

China Still Faces Challenges

However, this does not mean the country is problem-free. It still faces immediate challenges since the pandemic has left millions of migrant workers without a job. In fact, as many as 25 million jobs might be lost for good this year. Additionally, consumption is still well below where it was in 2019, and the economic recovery has not replaced the lost income, especially in rural areas.

The stock market poses a risk as well. The government had to bail-out several Chinese banks, and analysts believe the stock market is overheating. On top of that, there is the damage from the ongoing trade war with the US, which will undoubtedly hurt Chinese businesses.

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