US economists encouraged by China's economic rebound from COVID-19

WASHINGTON - Several US economists have been encouraged by the rebound of the Chinese economy, as recent data indicated that the Asian country is the first major economy to get out of the COVID-19-induced recession.

"This is very encouraging news. The control of the epidemic made possible the recovery in the second quarter," Jeffrey Sachs, a renowned economics professor at Columbia University, told Xinhua via email. "In our world today, good public health is the key to good economic outcomes."

China's gross domestic product (GDP) expanded by 3.2 percent year-on-year in the second quarter, following a 6.8 percent contraction in the first quarter, according to newly released data from the National Bureau of Statistics (NBS).

Nicholas Lardy, a senior fellow at Washington DC-based think tank the Peterson Institute for International Economics (PIIE), told Xinhua in a recent phone interview that China's industrial sector has been recovering "most rapidly," while the service sector has also seen expansion, with the country "doing stunningly well" on the trade side.

Retail sales, which are only slightly down in June compared with the same month last year, have done "extremely well" compared with other economies and "improved dramatically," the veteran China watcher noted.

"I think we'll see further recovery in retail sales, which will contribute to the growth of the service sector," Lardy said.

Andy Rothman, an investment strategist at San Francisco-based investment firm Matthews Asia, wrote in a recent analysis that China's V-shaped economic recovery continued for a fourth consecutive month in June, led by strong domestic demand.

The recovery of sales of autos and homes in China last month reflects that "middle-class and wealthy consumers have both sufficient money and enough confidence in the future to spend it," Rothman said.

Noting that restaurant and bar sales in China were still down last month, Rothman said these businesses that require customers to gather in confined spaces are likely to take a long time to fully recover.

Lardy told Xinhua that he thinks China's economic recovery will continue in the second half of the year, since the country has the COVID-19 under control.

He highlighted that China has managed to "put the brakes" on small outbreaks in Wuhan and more recently in Beijing with massive testing, quarantining and contact tracing measures.

"I think they have the resources and the commitment to avoid a negative effect of the coronavirus in the second half," Lardy said. "My view is that the virus is not likely to be a significant factor going forward."

The economist said he thinks China is going to grow by 2 to 3 percent this year, a more optimistic projection than that of the International Monetary Fund (IMF) and the World Bank, which both forecast a growth rate of roughly 1.0 percent for China.

Yukon Huang, a senior fellow with the Asia Program at the Carnegie Endowment for International Peace, however, took a more cautious tone.

"Recent data is encouraging and suggest that China is the first major economy to get out of the virus-induced recession but it is too soon to tell if the rebound has leveled off already or will accelerate," Huang told Xinhua via email.

"The caution comes from modest growth in consumption since households are cautious and concerns about export prospects given possible virus setbacks in the US and Europe," said Huang, who served as the World Bank's country director for China from 1997 to 2004.

Lardy, meanwhile, highlighted China's resilience on the export side. "Several months ago, a lot of people were saying that the external sector was going to be a big drag on China's growth," he said. "But that clearly has not happened yet."

Global trade is down 16 percent year-to-date, while China's exports in June rose 0.5 percent from a year earlier, Lardy said, noting that "it's an extremely strong performance" compared with the rest of the world.

"This year, when global growth shrinks and China's expands, on a conventional calculation, China's contribution to global growth is infinite because it's positive and global growth is negative," Lardy said. "So I think it's going to play a very positive role."

Sachs, also a senior United Nations advisor, said China's economic recovery will help to lead a global recovery.

China should join together with Japan, South Korea, and other countries that have suppressed the virus to support other countries, especially in Africa and Asia, to do the same, Sachs said. "That will speed the return to global sustainable development."