Economic rebound after COVID-19: China leads again
Tashkent, Uzbekistan (UzDaily.com) -- After the global financial crisis of 2008, China took the lead in the recovery of the global economy. Today the country plays exactly the same role. The rebound of China’s economy after COVID-19 is gaining momentum, while the developed world continues to wobble. Reported by Project Syndicate (USA)
These two crises are different. Wall Street was the epicenter of the 2008 crisis, and the COVID-19 pandemic began in Wuhan. But in both cases, China’s anti-crisis strategy turned out to be much more effective than the US strategy. In the five years after the start of the 2008 crisis, annual real GDP growth in China averaged 8.6% (purchasing power parity).
In the third quarter of this year, China’s GDP grew 11% after a sharp 55% post-pandemic rebound in the second quarter. The comparison with US data is striking. In both countries, there was a comparable economic contraction when quarantine was introduced there, which was done in the United States one quarter later. In China, the 33.8% decline in the first quarter was almost equal to the 31.2% decline in the US in the second quarter.
In its strategy to combat COVID-19, China capitalized on the experience of 2008, when the country shielded its financial markets from the toxic effects of the US mortgage crisis. Then, from the very beginning, a clear goal was set - to tackle the source of the shock, and not the collateral damage that it causes. Fiscal stimulus of US$596 billion provided in 2008-2009 worked as China took decisive action to isolate its markets from financial viruses.
Today, China has a similar approach: first isolating citizens from infection with the viral pathogen with "draconian health measures" to limit and mitigate the spread of the disease, then wisely applying monetary and fiscal measures to support the post-quarantine economic rebound. This approach is very different from the approaches taken by the United States, where, after the quarantine, the debate is mainly about the use of monetary and fiscal measures as the main tools for freeing the economy from a pandemic, and not about disciplined health measures to stop the spread of the virus.