Uniquely amongst major economies China's has returned more or less to the position it was in a year ago. An expansion of 4.9% in the third quarter was driven by industrial growth. Whilst it did not quite live up to expectations concerning GDP, it was well ahead of the 3.2% increase that had been reported in the previous quarter and is a major reversal of fortunes since the historic decline that the economy suffered in the first quarter of the year. It also appears that the upsurge in the economy is now moving beyond industrial growth and is also extending to domestic consumption. Industrial production in the country went up by 6.9% in September, representing the largest increase this year and the same as was present in December last year before the outbreak began. Retail sales have followed on and have also recorded their best performance this year rising by 3.3% last month. There have been seven straight months of decline earlier in the year and a much smaller increase of 0.5% in August so this is a significant increase in retail activity. Analysts are encouraged by the turn round and expect it to continue for the remainder of the year. However they point out that domestic demand still has some way to go as many consumers remain cautious because of uncertainty over the longer term impact of the pandemic. The unemployment rate in the country currently stands at 5.4%.
To give this further perspective industrial production is now growing at a faster rate than it did in much of 2019 and overall growth levels are moving towards the 6% that was seen in the economy in the third quarter of last year, before the pandemic took hold. The full year growth figure for 2020 as a whole is now forecast to be 2%, a remarkable contrast to all other major economies in the world. Forecasts for 2021 are even more encouraging with expectations that growth will be 7.6%. Both exports and imports are increasing meaning that there is potentially a positive knock on effect not just for the Chinese economy but for others doing business with it. This follows a situation earlier this year where, according to the research group Oxford Economics, Chinese share of global exports reached record levels. Remarkably it still appears that even during the pandemic China is managing to take market share from other countries.
China also continues to make progress in dealing with the health impacts of the pandemic. This week the country announced that it was seeking volunteers to take part in a large scale vaccination programmes with an as yet unproven anti-Covid vaccine. A recent Covid outbreak in Qingdao where 12 cases were uncovered led to plans to test 9 million people in 5 days. Whilst scepticism is frequently expressed about the reliability of some of these statistics, and transparency is not considered by everyone as a strong point of the Chinese government, these numbers suggest that China is on the front foot with regard to the pandemic both in public health and economic terms. Before the pandemic there appeared to be a power-shift towards China and away from Western economies. If these latest figures are anything to go by this may be yet another trend that has been accelerated by Covid-19, an ironic point one might think when President Trump has frequently referred to it as 'the Chinese virus'.
Wayne Bartlett is an author for accountingcpd. To see his courses, click here.
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