Analysis: China and U.S. economies diverge over coronavirus response

In this news, we discuss the Analysis: China and U.S. economies diverge over coronavirus response.

WASHINGTON (Reuters) – The United States and China have faced the spread of the devastating coronavirus pandemic in very different ways, and this split is reshaping the global battle between the world’s two major economies.

About 11 months after the Wuhan epidemic, official Chinese GDP figures this week show not only that the economy is growing, up 4.9% for the third quarter from a year earlier, but also that the Chinese are convinced enough that the virus has been defeated to go away. shopping, dining and spending brilliantly.

The total number of reported deaths in China is less than 5,000 and new infections are negligible, the result of drastic lockdowns, millions of tests and strict contact tracing that have paved the way for an economic rebound.

“China’s success in containing the virus has allowed its economy to rebound faster, and with relatively less political support, compared to other major economies,” said former US Treasury official Stephanie Segal, researcher principal at the American Center for. Strategic and international studies.

GRAPH: Global growth projections, real GDP –

In the United States, 221,000 people have died from COVID-19 after a delayed federal response, partisan battles over wearing masks and lockdowns, and numerous public events that do not meet public health guidelines. The country is in the midst of a new wave of infections.

Entertainment venues, restaurants and sites tourism are closed or partially open, millions of people are out of work indefinitely here, GDP is expected to decline this quarter, and the United States faces an economic output gap that could last for years.

“Obviously, the US government messed this up,” said Harry Broadman, former senior US trade official and managing director of the Berkeley Research Group. The Chinese Communist Party’s singular authority has helped Beijing enforce contact tracing and lockdowns, Broadman said. Other democracies, including New Zealand and South Korea, have eradicated the virus as has China.

The real difference between the United States and China is that Washington “has fought over stimulus issues on Capitol Hill and it’s still too little and too late,” said Broadman, who served under Republican presidents. and democrat. “This has created more and more uncertainty in companies.”

Ahead of the November 3 re-election, US President Donald Trump blamed China for the spread of the virus and claimed his administration had done everything in its power to contain it. Asked at a town hall scheduled to air Wednesday on Sinclair Broadcast Group if he would have done anything different, Trump replied, “No, not much.

Tyler Goodspeed, acting chairman of the White House Council of Economic Advisers, told Fox Business on Wednesday that the pace of the US recovery to date has far exceeded expectations. But opinion polls show Americans are growing unhappy with Trump’s handling of the pandemic.


Experts point to long-term concerns about China’s economic outlook, including the high level of indebtedness of its state-owned enterprises.

“Resorting to investment-led growth fueled by credit expansion further increases leverage and risk in an already weak financial system, and will further reduce efficiency and growth rate.” sustainable, ”said Mark Sobel, former senior US Treasury official. .

But for now, the divergent responses to the virus will impact the fierce political and economic rivalry between Beijing and Washington with ripples being felt around the world, experts said.

“China’s economy in 2021 will be 10% larger than it was in 2019, and all other major economies will be smaller,” said Nicholas Lardy, an economist at the Peterson Institute for International Economics.

This means that “China’s role in the global economy will continue to expand,” Lardy predicts, making it harder for any attempt by US policymakers to discourage other countries from making deals with Beijing or “decoupling” the economy. China’s global economy.

Chinese exports were stronger than expected, supported by demand for medical products abroad. While the IMF predicts that the volume of world trade will decline by 10.4% in 2020, China’s overall share in world trade has increased.

Beijing also has other advantages. “We are seeing signs of success from China on the exchange rate and the performance of the equity market at a time when many other economies are under pressure,” Segal said.

China’s budget deficit for 2020 will increase 5.6 percentage points to 11.9% of GDP – a smaller-scale increase than the massive stimulus deployed by Beijing during the 2008-2009 financial crisis, according to Fiscal IMF Monitor.

In contrast, the United States will see its 2020 budget deficit increase by 12 percentage points as a percentage of GDP, to almost 19%.

As Chinese consumption improves, retail sales are still down 7.2% in the first three quarters, with the disposable income of urban residents falling 0.3% in the same period. Strict lockdowns earlier in the year resulted in months of lost wages for many workers.

In Beijing, officials emphasize their leadership role.

“Controlling and preventing the epidemic in China is at the forefront of the world, and Chinese companies are supporting the global recovery of work and production through their own takeovers,” said Liu Aihua, spokesperson. speech of the National Bureau of Statistics, during a press conference where it announced the results of the GDP of the third quarter.

Meanwhile, the United States still does not have a robust contact tracing system or sufficient testing, Lardy said. These are things the United States could “have done much better without being an authoritarian one-party state,” he added.

Reporting by Andrea Shalal in Washington and Gabriel Crossly in Beijing. Additional reporting and writing by Heather Timmons in Washington; Edited by Howard Goller

Original © Thomson Reuters

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