China's economy accelerates ahead of the rest in race to recovery

Daniel Fowler
October 20, 2020

But China's new data is generating big headlines because observers see COVID lessons at play.

China's National Bureau of Statistics reported that industrial production rose 5.8% in July-September over the same quarter a year ago, a marked improvement over the first half's 1.3% contraction.

China's major indexes have strengthened after the Golden Week holiday, with the CSI300 rising almost 4% so far this month, helped in part to Beijing's continued policy support for its capital markets and economy. Its analysts expect GDP to grow by 1.9pc this year, compared to a fall of 4.4pc across the world as a whole, including drops of 4.3pc for the U.S., 8.3pc for the eurozone and 9.8pc in the UK.

The Nikkei 225 index added 1.1 percent to 23,672.60 while Hong Kong's Hang Seng climbed 0.8 percent to 24,591.92.

The blue-chip CSI300 index fell 0.8%, to 4,755.49, while the Shanghai Composite Index lost 0.7% to 3,312.67.

"Generally speaking, the overall national economy continued the steady recovery and significant results have been delivered in coordinating epidemic prevention and development", the NBS said in a statement. However, it warned, "the worldwide environment is still complicated and severe".

Virus Outbreak China
Consumer spending and industrial production in the country has risen to pre-pandemic levels

The economic rebound follows China's broad return to normalcy this summer, following sweeping COVID-19 curbs including stringent lockdowns, extensive contact tracing, and restrictions on global travel through the first half of the year, which allowed the authorities to nearly entirely stop transmission of the virus within China, with the exception of a few clusters that were contained locally. That broke a streak of nearly two months with no virus transmissions reported within China.

That brings growth for the first nine months of 2020 to 0.7 percent year-on-year. That was up from a 7.2% contraction in the first half as consumers, already anxious about a slowing economy and a tariff war with Washington, put off buying. Online commerce rose 15.3 percent.

Industrial production came in way above expectations, rising from 5.6% in August to 6.9% in September compared to the same months previous year.

The coronavirus pandemic, which caused China's first contraction since at least 1992 in the first quarter, is now largely under control, although there has been a small resurgence of cases in the eastern province of Shandong.

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Economists say China is likely to recover faster than other major economies because of the government's decision to impose the most intensive anti-disease measures in history. The IMF expects a 9.8% contraction in France, 6% in Germany and 5.3% in Japan.

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