What China’s Uneven Recovery Means for the U.S


Photo by Macau Photo Agency on Unsplash

The COVID-19 pandemic has adversely affected the largest economies in the world since China reported the first confirmed case in December 2019. The disease started spreading rapidly in Europe and the United States in February. The growth domestic product of China grew by 3 percent in the second quarter of the year while that of the U.S. was expected to reduce by almost 10 percent. In this article, we discuss the uneven economic recovery in China and how it will affect the United States.

China’s Coronavirus-related Uneven Economic Recovery

China has been experiencing an uneven economic recovery of late. It has reinforced current structural imbalances and increased the probability of stagnating below its initial growth rate before the Coronavirus pandemic began. Besides, high value-added engines in the Asian nation have started showing signs of weakness. For example, private companies that make up most of the medium and small-sized enterprises are struggling to get financial resources that the Government of China provides.

The service sector has been a major source of job opportunities in China for a long period. But, reduced mobility of workers has adversely affected the industry, especially catering and hotels. Moreover, the consumption rate of the citizenry has significantly reduced.

The Chinese government has created several COVID-19 policies that include guarantees, loans, and spending close to 2.5 percent of its GDP. Germany is spending 34 percent of GDP on the Coronavirus support policies while the U.S.A will spend 11 percent of its GDP to reduce financial and employment uncertainty in the country. Basic livelihood, effective government operation, energy, and food security, company support, and self-sustaining supply chains are the top priorities of the Chinese government.

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China has increased its response to the pandemic to more than $500 billion so far. Still, most of the analysis of the uneven economic recovery of China is based on state priorities and the country’s economic reporting. It focuses on capital expenditures, fixed asset investment, and industrial output. These aspects of the economy have a fast recovery rate as they benefit from reduced interest rates and credit availability.

Consumption contributes to about 60 percent of the GDP in China. Reinvigorating demand for goods and services is a major challenge for the government now. The savings rates in the Asian nation constrain consumption.

Parallels between the Chinese and United States Economic Recovery

It is difficult to compare the two economies as they have different economic, cultural, and political systems. Consumption is one of the major drivers of the economies in China and the U.S. It contributes to over 60 percent of GDP in the U.S. and 50 percent of GDP in China. The government of the United States has tried to invest in end consumers through the Payroll Protection Program and a check. China gave pre-paid vouchers for particular products. This disconnection hinders job growth in the two countries.

The United States Government has been offering financial aid to businesses and unemployment benefits to people in a bid to save the country’s economy. Even so, it needs to start other initiatives to maintain steady economic growth like that experienced in China. The government can offer business relief, invest in infrastructure, localize essential supply chains, and provide more grants to enable fast economic recovery.

 

 

 

 

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