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, Corona profiteer: From trouble spot to crisis winner: Why China’s economic strength could be dangerous | message, Forex-News, Forex-News
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Corona profiteer: From trouble spot to crisis winner: Why China’s economic strength could be dangerous | message

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, Corona profiteer: From trouble spot to crisis winner: Why China’s economic strength could be dangerous | message, Forex-News, Forex-News


, Corona profiteer: From trouble spot to crisis winner: Why China’s economic strength could be dangerous | message, Forex-News, Forex-News
China will be the only major economy with economic growth in 2020
Increased importance of China for German exporters
China’s economic strength could also pose problems

The corona pandemic continues to have a firm grip on the world. But while the economy in Germany has stalled again due to the second wave and the associated lockdown, the economic engine in China, the country of origin of the virus, is already running at full speed again. The economy of the People’s Republic grew by 6.5 percent in the fourth quarter of 2020 compared to the previous year. In 2020 as a whole, China was the only large economy to show economic growth at all – and thus even exceeded expectations. The Chinese economy grew by 2.3 percent last year, while the IMF had recently only forecast growth of 1.9 percent for the Middle Kingdom. According to Ning Jizhe, head of the National Statistics Office in Beijing, the GDP exceeded the 100 trillion yuan mark for the first time in a year.

China achieved economic growth in 2020

By Chinese standards, GDP growth of 2.3 percent is not exactly much, but the past year was anything but normal: In the Middle Kingdom, too, the economy recorded a violent slump in the first quarter, when numerous companies due to the draconian Lockdowns with strict exit restrictions had to temporarily close. Unlike in many other countries, however, the Chinese economy did indeed manage to recover in a V-shape thanks to lavish aid and investments. The government’s drastic measures have shown success: China has had the virus largely under control since the summer – there have only been isolated larger outbreaks again in the past few weeks – and the country’s economy has thus been able to recover faster than elsewhere. According to “Redaktionsnetzwerk Deutschland”, this proved to be an advantage in the further course of the pandemic: While the economy in numerous other countries was still paralyzed due to corona restrictions and lockdowns, Chinese companies were already able to deliver again and thus gain market share according to “Reuters”. According to “Welt”, the management consultancy McKinsey also comes to the conclusion that the rigorous measures in China have paid off economically: “Countries that have successfully reduced their number of COVID-19 cases have generally been more successful in relaunching their economies,” wrote the company in a briefing.

This can also be seen from the Chinese export data: In 2020 as a whole, exports rose by 3.6 percent. The strong export figures can be explained by the fact that the Chinese economy has adapted quickly to the new demand situation in other countries, said Max Zenglein from the China Merics Institute to dpa-AFX. Among other things, China has supplied medical equipment such as protective masks and technical devices such as computers, tablets and smartphones as well as other home office equipment, which was in high demand worldwide during the Corona crisis.

Germany benefits from Chinese growth

But the development also ran in the opposite direction – and thus had a positive effect on German companies, which were also able to benefit from the strength of the Chinese economy. According to the German Chamber of Commerce and Industry (DIHK), the People’s Republic of China is now the second most important sales market for German exporters – after the USA and even ahead of France. The Chinese car market also picked up again at the end of the year and, according to “Redaktionsnetzwerk Deutschland”, helped the German key industry to at least compensate for the losses in Europe through high sales in China. This development is likely to continue in 2021. For example, Volkswagen recently announced that the recovery of the Chinese economy is expected to see “considerable growth” in this important sales market again this year. According to the “Redaktionsnetzwerk Deutschland”, the German machine builders and the chemical industry can also expect more orders because they are closely linked to the automotive industry.

But China’s newfound strength could also become a problem

“No matter how often you hear the Chinese growth story, it still has the potential to shock and astonish,” US historian Adam Tooze told Axios – and that seems to be true not only with regard to the past year, but also for them near future. As the “editorial network Germany” reports, the IMF expects the Chinese economy to grow by eight percent in the current year. The growth rate should then level off at around five percent between 2022 and 2025. If this development is correct, China could become the largest economy in the world as early as 2028, as reported by the “editorial network Germany”, citing experts from Nomura. So far it has been expected that China would replace the US at the top of the world’s largest economies by 2030 at the earliest. Thanks to the corona effects, things could now go two years faster.

But China’s economic strength could also become a problem internationally, as the self-confidence of the People’s Republic is increasing thanks to the country’s success in pandemic control and economic growth – especially as long as the rest of the world is lagging behind in these areas. According to dpa-AFX, the head of the National Statistics Office, Ning Jizhe, said when the growth figures were published that China’s economic, scientific and all-encompassing strength had made another big leap. With the new level that the national strength has reached in the eyes of China, according to the assessment of the “Augsburger Allgemeine” the tone in dealing with other countries should become rougher and compromises even more difficult. In the past year there were already some political measures with which China upset the world, such as the new security law for Hong Kong or the aggression against Taiwan.

But China could also show itself more self-confident economically in the future and decouple itself more from other countries. The “editorial network Germany” reports that China would like to reduce its export dependency in the future in order to be more independent from other nations. To this end, domestic demand should be strengthened and innovations promoted more strongly. For companies from other countries, an important sales market could at least partially collapse in the future. According to “Welt”, the People’s Republic with its 1.4 billion inhabitants could, in an emergency, manage quite well on its own thanks to its huge domestic market. The world obviously needs China more than China needs the world – that too makes China’s economic strength dangerous.

Finanzen.net editorial team

Image Sources: gyn9037 / Shutterstock.com, testing / Shutterstock.com



, Corona profiteer: From trouble spot to crisis winner: Why China’s economic strength could be dangerous | message, Forex-News, Forex-News

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