beijingwalker
ELITE MEMBER
- Joined
- Nov 4, 2011
- Messages
- 65,195
- Reaction score
- -55
- Country
- Location
China's economy looks set for a much-vaunted V-shaped recovery, while the rest of the world lags behind. Here's why.
Saloni Sardana
Jul. 26, 2020, 12:45 PM
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?
Business Insider spoke to two economists to get their views on why.
China's potential GDP is much higher than other countries
Christophe Barraud, chief economist and market strategist at Market Securities told Business Insider a reason why China has recovered faster than the US, is due to its higher potential real GDP growth, also known as real output.
He said: "Potential real output is much higher in China than in advanced economies. Chinese [potential] is close to 6% while for advanced economies it is close to 1.5%."
Barraud added that demographics in China means that "mechanically Chinese growth will recover faster than in advanced economies."
"I think for Europe or US it will be almost impossible to reach the level seen in the fourth quarter of 2019 before 2022," Barraud said.
China's economy will contract by 1.2% in 2020
Miguel Chanco, senior economist at Pantheon Macroeconomics told Business Insider: "The second half of the year is going to be very different from Q2. It's going to be much softer. Now that's a huge parts of China's economy are sort of back to where they were pre-COVID-19."
China's economy grew by 3.2% year-on-year in the second quarter of the year and by 11% compared to Q1, beating Reuters economists' predictions.
But he now expects growth in China to fall about 1.2% for the full year.
Chanco explains that China has recovered faster than the US and Europe due to the strict measures it took at the inception of the crisis.
"Because it's taken a while for the virus to be suppressed in Europe, it will probably take a lot longer for those economies in [western] part of the world to sort of go back to their pre COVID rates of growth," he said.
The US likely faces a double-dip or "W" shaped recovery
For the US, both economists are predicting a double dip recession, signified by a "W shaped recovery" or a swoosh-shaped recovery at best.
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 US surpassed its biggest single day-rise with more than 75,000 cases reported on Thursday. As recently as June 24 the record was 37,014, and the record has been broken 11 times in the last month alone.
"I think most developed markets will actually look like a Nike Swoosh. So you basically have a very steep drop and prolonged sort of return for long and very gradual recovery. With the second wave in the US reaching new heights, I think you could probably see a double dip there," Chanco said.
https://markets.businessinsider.com...rus-covid-19-vs-rest-world-2020-7-1029430925#
Saloni Sardana
Jul. 26, 2020, 12:45 PM
- China looks to be on course for a V-shaped economic recovery from its coronavirus hit, growing 11% in the second quarter of 2020 compared to the first.
- But economist Miguel Chanco, of Pantheon Macroeconomics, tells Business Insider he expects China GDP to fall by 1.2% in 2020.
- China, however, is the only major economy that will see a V-shape, two economists told Business Insider. Most major nations will see W- or swoosh-shaped recoveries.
- Visit Business Insider's homepage for more stories.
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?
Business Insider spoke to two economists to get their views on why.
China's potential GDP is much higher than other countries
Christophe Barraud, chief economist and market strategist at Market Securities told Business Insider a reason why China has recovered faster than the US, is due to its higher potential real GDP growth, also known as real output.
He said: "Potential real output is much higher in China than in advanced economies. Chinese [potential] is close to 6% while for advanced economies it is close to 1.5%."
Barraud added that demographics in China means that "mechanically Chinese growth will recover faster than in advanced economies."
"I think for Europe or US it will be almost impossible to reach the level seen in the fourth quarter of 2019 before 2022," Barraud said.
China's economy will contract by 1.2% in 2020
Miguel Chanco, senior economist at Pantheon Macroeconomics told Business Insider: "The second half of the year is going to be very different from Q2. It's going to be much softer. Now that's a huge parts of China's economy are sort of back to where they were pre-COVID-19."
China's economy grew by 3.2% year-on-year in the second quarter of the year and by 11% compared to Q1, beating Reuters economists' predictions.
But he now expects growth in China to fall about 1.2% for the full year.
Chanco explains that China has recovered faster than the US and Europe due to the strict measures it took at the inception of the crisis.
"Because it's taken a while for the virus to be suppressed in Europe, it will probably take a lot longer for those economies in [western] part of the world to sort of go back to their pre COVID rates of growth," he said.
The US likely faces a double-dip or "W" shaped recovery
For the US, both economists are predicting a double dip recession, signified by a "W shaped recovery" or a swoosh-shaped recovery at best.
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 US surpassed its biggest single day-rise with more than 75,000 cases reported on Thursday. As recently as June 24 the record was 37,014, and the record has been broken 11 times in the last month alone.
"I think most developed markets will actually look like a Nike Swoosh. So you basically have a very steep drop and prolonged sort of return for long and very gradual recovery. With the second wave in the US reaching new heights, I think you could probably see a double dip there," Chanco said.
https://markets.businessinsider.com...rus-covid-19-vs-rest-world-2020-7-1029430925#
