Outlook For The Chinese Economy

We had the pleasure of speaking to Tao Wang, UBS chief China economist, last week on our Behind the Markets podcast. Wang is based in Hong Kong, and her team leverages insights from the UBS evidence labs, with data scientists all over the world tracking what is happening in the global economy and the Chinese economy.

Wang acknowledges there are issues with the availability of reliable data for the Chinese economy, but compared to other emerging market economies, Wang believes the data happens to be quite good.

Wang emphasized that gross domestic product (GDP) is always a key estimate figure and there are inherent methodology issues in estimates. She acknowledges that there could also be data manipulation from local officials. Wang’s team tries to get corroborative evidence from a wide swath of data points like industrial production, property activities, exports and imports, which can be verified against other country data to get a better understanding of the economy. When construction is strong, Wang looks at steel production and iron ore to verify the strength.

First in, First out

China was the first to shut down from the novel coronavirus with a “forced recession.” While people’s movement was still relatively slow in April, industrial production and port activity (for export and imports) had a sharp rebound earlier than expected. Many of those activities are currently back to normal or above normal at this stage of the year.

Bigger gatherings and events are still lagging behind, however, although domestic travel is recovering as well. Wang’s team is looking at year-over-year growth of 5%–6% in the third and fourth quarters of 2020.

Different Government Responses

China locked down Wuhan, the epicenter of the virus, which was bad for the province but helped prevent the virus from spreading throughout the country. The Chinese government focused its relief measures on getting people back to work, which was a challenge with public transportation shut down. Compared to the U.S., there were very few subsidies given to individuals, and instead, the government tried to help reopen the economy more quickly.

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