Weekly Economic Report
This week, with the release of the Chinese GDP and associated monthly sector statistics -- at the same time as US retail sales and industrial production for June -- we come back to the familiar topic of comparing and contrasting the two diametrically opposed economic systems and, in particular, why COVID presents so much greater a challenge for the US. The Chinese growth advantage in a post-COVID world is globally important, as 2021 is the centennial year of the founding of the Chinese Communist Party, and they will be using that event and the upcoming 2022 Winter Olympic Games in Beijing to tout the superiority of their system – particularly for the emerging markets. Both the IMF and the World Bank have indicated that despite a global slowdown, China will maintain its position as the global growth leader – and by a wider margin than previously, meaning a faster growing share of global GDP. The IMF projects that China will grow an average 4.5% over the next two years, roughly 1.5% below its previous 6% path. Meanwhile, the US and Europe are expected to contract at -1.9% and -2.4% annual rates, respectively, about 4% slower than their pre-COVID pace. Even the fast growing ASEAN5, which trailed China by just 1.2% in 2019, are expected to trail by 3% in 2020 and another 2% in 2021. With China’s export growth limited by both its already world-dominating scale and slower growth abroad, most of its expected improvement will be generated domestically.