China regains strength to propel global recovery

Global policymakers as well as the media are now praising the pace of China's economic growth and pinning high hopes that the world's second largest economy will power a global recovery again as it did a decade ago.

China's amazing growth of 4.9% in the third quarter brightens its global standing. And it is the only major world power that successfully avoided a recession this year as the pandemic forced lockdowns and crippled businesses worldwide.

But just two-three months ago, China's outlook was not inspiring in the eyes of global policymakers and media despite signs of a solid rebound after its success in controlling the spread of the coronavirus.

Take a July report run by the Wall Street Journal.

It says during the 2008-09 financial crisis, China's soaring demand for raw materials and other goods boosted growth across the world, underpinning rebounds in places like Brazil and Germany. Some countries, like Australia, avoided recession almost entirely thanks to trade with China.

"China isn't poised to help as much this time. Despite signs of a solid rebound recently, its economy has been hit much harder than in 2008-09, limiting its ability to lift other nations from recession prompted by the coronavirus pandemic," reads the Wall Street Journal report.

Mark Zandi, chief economist at Moody's Analytics, said it is now the US that may be in a better position to lead the global economy out of recession. Washington's fiscal-policy response to Covid-19 amounts to 13% of GDP this year, he said.

Thomas Nuernberger, Greater China chief executive of ebm-papst Group, expressed doubt about China's capability to lead global recovery.

"For 2020 it is not possible, I think, that China does the job" it did in 2008-09, said Thilo Brodtmann, executive director of the German Mechanical Engineering Industry Association, a trade body. "Quite a few companies in China are struggling."

There were strong reasons questioning China's capability. The world's second largest economy shrank by 6.8% in the first quarter from a year ago as lockdowns paralysed businesses.

China has not set an economic growth goal for this year as it deals with the fallout from the coronavirus pandemic. It is the first time Beijing has not had a gross domestic product (GDP) target since 1990 when records began.

Third quarter data released on Monday appears to be a game changer.

A couple of days ago the IMF chief said China's recovery helps global recovery. China growth limits global economic damage from the pandemic, the global lender says in its Global Economic Outlook 2020.

The Wall Street Journal headline now reads "China Economy Grows 4.9% as Rest of World Struggles With Coronavirus."

The third quarter growth put China's economy back towards its pre-coronavirus trajectory half a year after the pandemic gutted its economy, says its report.

The numbers show China's early and aggressive containment of the coronavirus has set the economy up for a faster rebound than any of its peers. That is a rare positive for a world economy still clawing its way out of its worst slump since the Great Depression – a revival further complicated by the resurgent virus in Europe and the US, says Bloomberg.

"It's an encouraging and hopeful message for the rest of the world," said Rob Subbaraman, global head of macro research at Nomura Holdings Inc in Singapore. "If you successfully handle the health crisis, your economy can recover."

China's success in fighting the virus and reviving the economy helps consolidate its influence in Asia Pacific.

It is now closing in on the US as the most powerful country influencing the Asia Pacific, as America's handling of the Covid-19 pandemic tarnishes its reputation, a study showed.

While America retained its place as the region's top superpower, its 10-point lead on China two years ago has halved, according to the Sydney-based Lowy Institute's Asia Power Index for 2020, which ranks 26 nations and territories.

The US "lost prestige" due to its poor response to the pandemic, multiple trade disputes and President Donald Trump's moves to withdraw from multilateral deals and agencies, according to Herve Lemahieu, the study's research chief and director of Lowy's Asian Power and Diplomacy Program, says a Bloomberg report on Sunday.

A successful and strong rebound of China's economy is helpful for the global economy – and Bangladesh's too.

China's quick rebound is a good news for Bangladesh as Dhaka-Beijing economic ties are now stronger and wider than any time in the past.

"Economic relations between the two countries are explicit in trade and investment. A stronger China means consumer spending there will peak which will widen scopes for Bangladesh's exports," says Dr Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue, a local think tank.

Bangladesh could gain more from the duty-free export facility offered by China if conditions for rules of origin were relaxed, he feels.

Apart from putting money in a number of development projects in Bangladesh, there are funding commitments in lot more projects whose materialisation has stalled or slowed due to the economic uncertainties caused by Covid-19.

"China's quick return to positive zone will expedite the process of implementing previous loan commitments as well as pave the way for new proposals in future," Dr Moazzem hopes.

China now is conducting clinical trials of 11 Covid-19 vaccines, four of which have entered phase III trials, raising hopes in Chinese authorities that general public in China could start receiving Covid-19 vaccines as early as November.

If China regains economic strength faster, existing close bilateral economic relations will boost Bangladesh's potentials to get a priority access to Chinese vaccine supplies, the CPD research director believes.

But there are risks of winter wave of infection like the one in Europe and feared in the US too. "I believe China will remain extra cautious about the risks, which could slow the pace of projected growth," the trade analyst cautions.

Daniel Moss, Bloomberg's opinion columnist, writes China's economy is back-ish and the world can exhale. Without this rebound, the nascent global recovery would be on even thinner ice.

The headline of his write up "Maybe There's Hope for a V-Shaped Recovery After All" also indicates rebound of hope for a V-shaped recovery of global economy.