When China’s GDP recovered by 11% quarterly in the last quarter, it said the world’s most populous country and the first country affected by the coronavirus pandemic may be on track for a V-shaped recovery, which has more than one fantasy in other parts of the world. .
China is well ahead of the game in terms of its recovery, but how did it get there, and what’s to come for the world economy?
Christophe Barraud, Market Securities’ leading economist and market strata, told Business Insider that one of the reasons China has recovered faster than the United States is due to its high growth potential of genuine GDP, also known as genuine production.
He said: “Potential real output is much higher in China than in complex economies. China’s [potential] is close to 6%, while for complex economies it is close to 1.5%.”
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Barraud added that demographics in China mean that “mechanically Chinese expansion will be faster than in complex economies.”
Miguel Chanco, senior economist at Pantheon Macroeconomics, told Business Insider: “The component at the moment will be very different from the second quarter. It’s going to be a lot smoother. It is now a major component of the Chinese economy which is pre-COVID-19. “
China’s economy grew by 3.2% year-on-year in the quarter of the year and 11% during the first quarter, exceeding Reuters economists’ forecasts.
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But he now expects growth in China to fall about 1.2% for the full year.
“Because it took some time to get rid of the virus in Europe, it will probably take much longer for those economies in the [Western] component of the world to return to their pre-COVID expansion rates,” he said.
For the United States, economists expect a double-dip recession, manifested through a “W-shaped recovery” or in a swoosh-shaped recovery.
Market participants spent much of June speculating whether the US was on course for a V-shaped recovery as some states began to re-open and May’s jobs report showed the US added 2.5 million jobs defying expectations of 7.5 million jobs lost. But this V-shaped recovery expectation for the US has waned after a surge in virus cases.
The United States surpassed its biggest buildup in a day with more than 75,000 cases reported on Thursday. As recently as June 24, the record of 37,014 and the record was damaged 11 times in the last month alone.
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Chanco said India is the only country for which it predicted an “L-shaped recovery,” necessarily a strong contraction without a genuine economic return.
“We expect a 10% contraction in the Indian economy this year and this is historic in many tactics for someone who has experienced a recession in its fashion history decades,” Chanco said.
“But in China we are probably looking at 1.2% contraction year-on-year. So that’s a huge difference in outcomes. I think this is where sort of China has made other emerging markets look bad,” he said.
Recent tensions between India and China can also prolong India’s recovery of the virus, Chanco said.
Tensions have erupted in recent weeks between India and China, and some already speculate that fighting on the Himalayan border of the two countries may be the catalyst for a primary conflict.
Chanco said India’s strong “protectionist response” to the outbreak would likely be problematic given India’s dependence on imports.
“In a way, the fact that Brazil is an exporter of raw fabrics will gain gigantic advantages … because the industrial ties between Brazil and China are much more powerful than between China and India,” he said.
Chanco added: “If the Chinese ask for recovery as expected, to some extent the coup in Brazil will be moderated. But India, being a multinational economy driven by a call in favor, will gain advantages from this kind of recovery. For. “
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