19 Aug China amid a COVID Comeback. Click to keep reading…
As the first global economy hit with fallout from the COVID-19 virus, China is also the first economy that has begun to recuperate. It looks like the path to economic growth will be long and winding. Beijing is stimulating growth by using state investment in certain sectors like infrastructure and public works.
China’s GDP grew by 3.2%, after a dramatic decline in the first quarter of 2020. On the current trajectory, overall growth in China’s GDP should be about 2% in 2020. While the number is not impressive for China, it is still growing.
The money being spent by Beijing is going to state-owned firms which are typically less efficient than private-sector competitors. And it’s unlikely that the state-backed firms will repay the government loans. Chinese retail sales remain weak, and exports still face a weak global economy.
In the U.S., the Chinese recovery will spark demand for iron ore, copper, oil, coal and other infrastructure related commodities. China has not achieved its import targets for American food, fuel and manufactured goods, which is contributing to trade tensions. Added to the tension are the worsening diplomatic relations, making a comprehensive trade deal seem unlikely. As Beijing exerts control over Hong Kong, the U.S. is suspending its special trade status.
This uncertainty may cause organizations to reroute their supply chain. Vietnam and Taiwan have already seen a substantial increase in exports to the U.S.
What is your plan going forward? Lupton Associates partners with world-class domestic and off-shore manufacturers. Contact us today! We can help you navigate the stormy seas that COVID has left behind.–Kiplinger Letter (2020 July 24). Vol. 97, No. 4.