How wrong can Westerners be about China

With a megalockdown through the crisis - China's economy is booming

The numbers are impressive even by Chinese standards and their constant tendency towards superlatives: the Chinese economy grew by 18.3 percent in the first quarter of this year. It is the largest increase since they began measuring GDP growth in quarters 30 years ago. This is all the more astonishing as the global economy is groaning under the pandemic.

On closer inspection, however, the number is put into perspective, as is so often the case. The increase relates to the same quarter of the previous year, i.e. not to the last three months of 2020, but to the period from January to April 2020. At that time, China was affected by the corona pandemic and the ultra-hard lockdown in Wuhan, while a large part of the World was just beginning to take coronavirus seriously.

The world's second-largest economy had almost come to a standstill at the time, and Hubei Province with its capital Wuhan was sealed off from the outside world. At that time, the measures led to the worst economic slump in 30 years - a minus of 6.8 percent. Up to 70 million Chinese were temporarily out of work at the time.

Strict measures

But after the mismanagement in the first weeks of the pandemic, the Communist Party reacted the way it does best: radical, authoritarian and totalitarian. Beijing effectively closed its borders at the end of March. Anyone who still wants to go to the People's Republic since then has to undergo a strict two-week quarantine in a state-selected hotel room and several corona tests. Beijing has thus managed to bring the pandemic under control - at least if the official figures are to be believed. Despite these controls, local outbreaks continue to occur (which, if you follow the government narrative, cannot actually be explained), but the Chinese economy is running again.

Anyone who currently lives in Shanghai, Beijing or Guangzhou could easily forget that a pandemic is raging in the rest of the world. The restaurants, bars, cafes, cinemas and especially shopping malls have been open for months. The Chinese consume and boost the domestic economy. Sales in retail rose by 34.2 percent in March compared to the same month last year. For the cadres in Beijing, this is also a welcome test case for the new "two-cycle" strategy. In the coming years, the domestic economy is to become less dependent on trade with foreign countries. At the same time, a second economic cycle should remain intertwined with global trade flows. The People's Republic is thus preparing for the "decoupling" propagated by Washington, the unbundling of trade with China and the rerouting of global supply chains to other Asian countries.

Strong annual growth expected

The new upswing in China is likely to be sustainable, even if it will not continue at this rate. Moderate growth of seven percent is expected for the second quarter, and around eight percent for the year as a whole. The party's growth targets set in the five-year plan are six percent. But growth comes at a high price. While the Chinese national debt is relatively low, the indebtedness of private companies and local governments are considered highly problematic.

The Asian stock exchanges have rallied after the impressive economic data from Beijing, but failed to make up for the week's losses. (Philipp Mattheis from Beijing, April 17, 2021)