Why China is beating US and Europe in the COVID-19 recovery race

2020-11-11Nordic Asia Team
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Forceful containment strategy led to superior COVID-19 control in China compared to US and Europe

By applying a forceful containment strategy to first defeat the virus before solving economic pains caused China extra short-term pains but has since led to a stronger post COVID economic recovery compared to US and Europe which adopted a looser containment strategy in the beginning of the pandemic.

China’s forceful containment strategy was effective to quickly reduce the number of active cases in China early on with the number of active cases peaking in mid-February. Since then, most of the few new cases in China are imported with an almost non-existent spread within China. The forceful containment strategy caused a sharp GDP decrease of 6.8% in Q1 2020 (corresponding to a net decrease of 13.2% vs. Q1 2019). However, with the virus under control, China has been able to gradually go back to normalized economic activity. On the contrary, US and Europe never managed to get the virus fully under control and is now facing a second wave of infections that is severely impacting the economies.

Retail Sales and Passenger Car Sales show a strong post COVID recovery in China starting as early as in the end of Q1 2020

Retail Sales fell with around 20% during the first quarter due to COVID but has since May recovered and displayed a similar sales level compared to last year.

Passenger Car Sales fell even more during the first quarter with February sales decreasing more than 80% compared to last year. But as opposed to Retail Sales the Passenger Car Sales has not only managed to recover to similar sales levels as last year but has been able to display a sales growth of around 10% since May. This recent jump in Car sales could be due to a pent up demand from the first quarter.

Strong correlation between successful COVID-19 containment and post COVID-19 economic recovery

Data suggests that countries with a more successful containment of the number of COVID-19 cases have generally been more successful at reopening their economies thus leading to an improved post COVID-19 economic recovery.

Among the members of G20 (the 20 largest economies in the world), only China is expected to reach a positive GDP growth of 2.1% in 2020, with the post COVID-19 economic recovery starting as early as in the end of the first quarter 2020. Moving into the fourth quarter of 2020 China’s post COVID-19 economic recovery is still going strong supported by a pent up demand in certain categories. In the US and Europe, by contrast, the virus arrived later, the economic recoveries were slower and both US and Europe are now facing a second wave of infections that will negatively impact the economic recovery. According to GDP growth foracasts by economists surveyed by Bloomberg, US GDP is expected to decrease by 4.4% and German GDP is expected to decrease by 6.0% in 2020. South Korea, which has managed to contain the number of COVID-19 cases better than US and Europe (but not as good as China) is expected to have a GDP decrease of 1.0%.

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Thomas Nordén
Thomas Nordén

Stockholm OfficeNordic Asia Group 1987 AB Brännkyrkagatan 14A 118 20 Stockholm www.nordicasiagroup.com
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