Weathering the crisis well
While the authorities in the United States and the European Union continue to struggle with the virus, corona seems to have been reasonably brought under control in most of East Asia. In relative terms, it could be said that this region of the world has weathered the crisis well. Especially in the region’s most important economy, China. The rise of the Chinese currency – the renminbi – against the dollar by more than 5% since this spring is a result of this. Now you will say, the dollar has also fallen against the euro. That is true, but the renminbi also rose by more than 3% against the euro this summer. The pandemic seems to have accelerated China’s advance on the world economic stage.
Better-than-expected economic figures
For example, industrial production in China increased by 5.6% in August compared with the same month a year ago. Investment in real estate was also 4.6% higher than in the same month last year. These figures were certainly better than expected, but are still due to some extent to the government’s stimulus measures. The fact that even retail sales turned out better than expected and were 0.5% higher than last year was definitely a surprise. Indeed, consumer spending has so far been the weak spot in China’s economic recovery. Consumers had not yet recovered from the blow of the pandemic and retail sales had fallen every month this year. So until last month.
In the second quarter, Chinese GNP also grew by 3.2% after the fall in the first quarter. This makes China one of the few countries with a GNP that was higher in the second quarter than at the end of 2019. Bear in mind that the increase in consumer spending was not the result of large-scale state aid. This is in contrast to the United States and the European Union, where governments have kept citizens on their feet on a large scale with all kinds of support measures. In China, state aid was largely limited to the stimulation of industry.
Exports play an important role in this Chinese growth story. Even before the outbreak of the virus, China was the most important workshop in the world and that has not changed. In fact, China’s share of world trade has increased. A glance at a graph of Chinese exports shows that China’s share of total world exports has increased from 14 to 16%. Trade war with the United States? Little of that is reflected in these figures. In particular, China appears to have exported electronics and medical equipment to the rest of the world. Partly helped by the fact that the lockdown restrictions in China were lifted as early as April, where they were still widespread in the rest of the world.
Trade surplus and rising stock markets
Partly as a result of these developments, the stock markets in China are higher this year. For example, the CSI 300 index stands at a 13% profit this year, and the Shenzhen Stock Exchange – many technology funds – at a 26% profit. The Chinese currency, as has been said, has risen to a level that investors have not seen for a long time. For a dollar, we now receive only 6.79 renminbi. Another consequence of this Chinese advance is the ever-increasing trade surplus with the United States. Of course, as a result of the pandemic, China has not yet implemented 40% of its trade agreement with the United States. Nevertheless, the trade surplus with the United States has grown by 25% since the presidency of Trump to over USD 300 billion annually.
More tensions between China and the United States
So, despite all the rhetoric and pressure from the US President, not much has actually changed. In fact, the situation has been shifted even more to China at the expense of the United States. It will put even more pressure on relations between China and the United States. Whoever is going to become President will soon be in November. After all, in anti-China rhetoric, the Democrats are not inferior to the current President.