An employee inspects cargo handling equipment at a container terminal in the China (Shandong) Pilot Free Trade Zone in Qingdao, Shandong province. [Photo by Zhang Jingang/For China Daily]
Nation set to overtake United States in economic ranking earlier than forecast
China could emerge from the coronavirus pandemic with a more dominant economy, replacing the United States as the world's largest within the current decade, according to experts.
The world's second-largest economy recorded 3.2 percent growth in the second quarter, according to the National Bureau of Statistics, and has the potential to lead the global economy out of recession in the months ahead.
Jeremy Stevens, chief China economist at Standard Bank, said China is the only major country to successfully balance containing the COVID-19 pandemic and reviving its economy.
"The Chinese economy will certainly outperform almost all others, probably by quite a wide margin," said Stevens, who is based in Beijing.
"China's response to the pandemic has been far more focused, forceful and effective than elsewhere. Policy has focused on keeping businesses afloat and people employed, and this has paved the foundation for the swift recovery."
In the US, there have been more than 155,000 deaths from the virus, according to Johns Hopkins University. With the US economy contracting by a record 32.9 percent in the second quarter and on track for an 8 percent yearly slump, China's economy may become bigger than that of the US sooner than previously anticipated.
The Centre for Economics and Business Research, a consultancy based in London, predicts this could happen as early as 2029, four years ahead of the forecast in its annual World Economic League Table published before the coronavirus crisis began.
Douglas McWilliams, the consultancy's deputy chairman, said, "We will not have a definitive prediction until we update our table later this year, but our best guess at this stage is that China will overtake the US at least two years earlier than expected and possibly up to four years earlier.
"China has managed the aftermath of coronavirus much more efficiently than Western economies and will therefore catch up with these economies rather more quickly," he said.
Stevens said the gap between the growth rates in China and the US has not been as wide since the start of the past decade, when China was still enjoying double-digit economic growth.
"This is a deviation from the margin last seen in 2010, and China's economy is likely to expand at a decade-high in 2021 owing to favorable base effects," he said.
Kerry Brown, director of the Lau China Institute at King's College London, said the crisis demonstrated the effectiveness of the Chinese governing system, helping it to bridge the gap with the US in terms of the size of its economy.
"The centralized nature of economic decision making in China means that in times of crisis like this, the Chinese government has more levers available to it to control things that might stimulate the economy and employment," he said.
"China still has plenty of potential sources of domestic growth — consumption for instance — and it can now cultivate these further. That means it will be able to face the current issues with more flexibility and readiness than others, although the question is whether this will be sustainable."
Route to recovery
Edward Tse, founder and CEO of Gao Feng Advisory, a management consultancy, thinks the strength of China's economy offers a pathway to global recovery.
"China's role in the world in terms of its contribution to global GDP growth continues to be very significant and is probably going to be even more significant because the rest of the world is lagging so far behind," he said.
"It is important that other countries take note of this, but at the moment I am not sure they are. China is now so important to how we all get out of this."
President Xi Jinping made clear in a letter to global CEOs published on July 16 that the fundamentals of China's long-term economic growth had not changed despite the pandemic.
He said the country remained committed to deepening reform and further opening up its economy to provide a better environment for investment and one in which Chinese and foreign enterprises can thrive.
Five days later, Xi reinforced this message. Speaking to a symposium of Chinese entrepreneurs, he said the government remained committed "to creating a market-orientated, law-based and internationalized business environment".
Koh King Kee, president of the Centre for New Inclusive Asia, a think tank based in the Malaysian capital Kuala Lumpur, said this would make China an attractive place for investment as the world recovers from the pandemic.
"Xi's pro-business statement will undoubtedly provide a big boost to business confidence in China, both to foreign and local enterprises," he said.
Even before the pandemic, there was evidence that foreign companies were finding it easier to do business in China.
A new Foreign Investment Law took effect on Jan 1, opening up other sectors for investment and giving foreign companies the same rights as domestic ones by entitling them to "national treatment".
According to the World Bank, in terms of the ease of doing business, China ranked fifth among 190 nations in improvements made since 2015.
In its Doing Business 2020 report, China ranked 31st among countries having the best environment in which to do business, ahead of France (32nd), Israel (35th) and the Netherlands (42nd), and only just behind Japan (29th), Germany (22nd) and Canada (23rd).
Parag Khanna, founder and managing partner of FutureMap, a strategic advisory company, and author of The Future is Asian, said China's openness has been particularly evident in the financial markets.
"It has become clear in recent months that China is keen on capital account liberalization, and Western asset managers have been increasing their exposure to China's debt, equity and bond markets despite American political pressure to disengage," he said.
"The lifting of foreign ownership caps in the banking and insurance sectors and Tesla's growth in China speak to the market opportunities," he said, referring to the US electric car maker and clean energy company.
Andrew Sheng, a former central banker and financial regulator and now distinguished fellow at the Asia Global Institute at the University of Hong Kong, said this openness will be beneficial to China as it emerges from the coronavirus crisis.
"The commitment to deepening reform and further opening-up is welcome and necessary if China and the world economy are to recover strongly," he said, adding that even with this commitment, attracting international investment will remain a challenge.
"One must be realistic that global corporate investment will be weak this year until the pandemic is controlled. Many global corporations are struggling to control the damage to their own balance sheets, so they will have fewer resources to do long-term investments abroad," Sheng said.
(From the China Daily app)