Is China eating other countries’ lunch?, asks an economist this week.
Certainly starting to look like it.
While other nations continue to struggle in the global pandemic, China’s success in curbing the virus and its investment-driven stimulus has made it the best performing economy in the world.
And in some ways, the pandemic has actually escalated that rapid rise, argues TD senior economist Sohaib Shahid. Here’s what he found:
Recovery
Before last year China’s economy was slowing down, but the pandemic changed that, said Shahid. Because the virus was contained early, not only has the Chinese consumer made a big comeback, exports have as well. The nation is the only major economy expected to register growth in 2020, with an 1.8% rise forecast. China’s share of global output in 2021 is expected to rise to about 19%, 1.7 percentage points higher than before the pandemic and above estimates of where it would be if COVID hadn’t happened. By 2025, that share is expected to top 20%, while the U.S.’ output is expected to shrink to 14.8%.
Investment
China’s stock market has outpaced the world, even the United States, which has seen a blistering, albeit turbulent, run. China’s CSI 300 has gained 32% since the beginning of last year, compared to the S&P 500’s 17% gain. Institutional investors are also piling in, reducing the market’s volatility and making it even more attractive to foreign investors, said Shahid.
While global foreign direct investment dropped 49% (Canada down 32% and U.S. 61%) in the first half of 2020, China’s only declined 4%.
And earlier this month, the renminbi rallied to its highest level in more than two years, recovering the losses brought on by the U.S., China trade war.
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