World Newsletter

5 August 2020



China could emerge from the coronavirus pandemic with a more dominant economy, replacing the United States as the world's largest within the current decade, according to experts.


The world's second-largest economy recorded 3.2 percent growth in the second quarter, according to the National Bureau of Statistics, and has the potVirus might have infected bats years ago


ential to lead the global economy out of recession in the months ahead.


Jeremy Stevens, chief China economist at Standard Bank, said China is the only major country to successfully balance containing the COVID-19 pandemic and reviving its economy.


"The Chinese economy will certainly outperform almost all others, probably by quite a wide margin," said Stevens, who is based in Beijing.


"China's response to the pandemic has been far more focused, forceful and effective than elsewhere. Policy has focused on keeping businesses afloat and people employed, and this has paved the foundation for the swift recovery."


In the US, there have been more than 155,000 deaths from the virus, according to Johns Hopkins University. With the US economy contracting by a record 32.9 percent in the second quarter and on track for an 8 percent yearly slump, China's economy may become bigger than that of the US sooner than previously anticipated.


The Centre for Economics and Business Research, a consultancy based in London, predicts this could happen as early as 2029, four years ahead of the forecast in its annual World Economic League Table published before the coronavirus crisis began.


Douglas McWilliams, the consultancy's deputy chairman, said, "We will not have a definitive prediction until we update our table later this year, but our best guess at this stage is that China will overtake the US at least two years earlier than expected and possibly up to four years earlier.


"China has managed the aftermath of coronavirus much more efficiently than Western economies and will therefore catch up with these economies rather more quickly," he said.


Stevens said the gap between the growth rates in China and the US has not been as wide since the start of the past decade, when China was still enjoying double-digit economic growth.


"This is a deviation from the margin last seen in 2010, and China's economy is likely to expand at a decade-high in 2021 owing to favorable base effects," he said.


Kerry Brown, director of the Lau China Institute at King's College London, said the crisis demonstrated the effectiveness of the Chinese governing system, helping it to bridge the gap with the US in terms of the size of its economy.





Wuhan, Hubei province, may not be the place where the COVID-19 virus crossed from animals into humans, despite the first clusters of infections having been reported in the city, said Michael Ryan, executive director of the Health Emergencies Program of the World Health Organization.


The city had a surveillance system designed specifically for picking up atypical pneumonia cases, he said at a routine news briefing on Monday."It was there for a very specific purpose. And the fact that the fire alarm was triggered doesn't necessarily mean that is where the disease crossed from animals into humans."


When commenting on the future joint investigation, Ryan said Chinese scientists have done a lot of great work and provided valuable preliminary data. A more extensive epidemiological study to look at the first cases and clusters in Wuhan will begin with the participation of scientists from around the globe, according to the WHO.


Two WHO experts were in China to conduct groundwork for an investigation into the animal origins of the novel coronavirus from July 11 to Sunday, according to information released by China's National Health Commission on Monday.


During their stay in China, they held many talks with their Chinese counterparts on scientific research, including the route of transmission and animal origin of the virus, and exchanged ideas on future scientific study plans.


WHO Director-General Tedros Adhanom Ghebreyesus said WHO and Chinese experts have drafted the terms for the studies and the program for an international team led by the WHO. "The international team will include leading scientists and researchers from China and around the world," he said.


The origin of the novel coronavirus has puzzled scientists since its discovery. According to a study published in late July in the journal Nature Microbiology, scientists now have further proof that the coronavirus evolved in the wild and may have been circulating in bats for more than 40 years.


The study, conducted by scientists from China and Europe, said the virus may have been poised to jump to humans for some time. Meanwhile, this discovery discredits conspiracy theories that the coronavirus was bioengineered or escaped from a lab, it added.



The researchers compared the genetic makeup of the novel coronavirus with that of a close relative in bats−a virus called RaTG13. The latter was discovered by noted Chinese virologist Shi Zhengli in Yunnan province in 2013, according to the journal Science.





A report released by the 21st Century Economic Research Institute on Wednesday analyzed China's 17 cities with a GDP surpassing 1 trillion yuan in 2019 in terms of appeal to college students, based on five dimensions: the number of college students on campus, employment, healthcare, education and housing price.


The number of college students on campus in Guangzhou, Zhengzhou and Wuhan exceeds 1 million, and the per capita disposable income in Shanghai and Beijing leads that of other cities. Meanwhile, Chongqing and Qingdao created the most new urban jobs in 2019 with figures both above 750,000, the report said.


Graduates will leave their university's city if it lacks enough good job opportunities, said the report, and the city's GDP growth, per capita disposable income and new urban jobs are the important factors affecting the employment of college students.


The report pointed out that graduates have a strong desire to own a home in the city where they plan to work.


The housing price in Shanghai is almost four times higher than that in Changsha, but Changsha, Foshan, Wuhan and Ningbo have the prominent advantage that disposable income can obtain more square meters of space when buying a home. Shanghai and Beijing stand out in terms of per capita disposable income, with respective figures of 69,400 yuan and 67,800 yuan in 2019.


Beijing is comfortably ahead of other cities in the supply of primary and secondary education sources, followed by Shanghai, Nanjing, Tianjin and Qingdao.


The number of beds in medical and health institutions in Changsha, Zhengzhou and Chengdu is over 90 per 10,000 people, higher than the number in other cities.





Monetary authorities may come out with more flexible policies and facilitate the risk prevention mechanism during the second half of this year to ease the financial burden of small businesses, experts said on Tuesday.


Buoyed by the sustained economic recovery, the People's Bank of China, the central bank, is likely to stay away from aggressive monetary easing in the third quarter. Instead, it will rely more on policy tools to ensure sufficient liquidity for its fiscal measures, especially for government bond issuance, they said after the midyear meeting of the central bank on Monday.


Monetary policy during the second half of the year would tend to be more flexible and appropriate, relying on targeted measures and existing policy implementation to stabilize enterprises and secure employment, said a statement on the central bank website.


It will also utilize various monetary policy tools to achieve a faster year-on-year growth in broad money supply and aggregate financing. The policies should "grasp the right rhythm" and optimize the structure, to promote "substantial growth" of loans for small and micro firms and the manufacturing industry, it said.


The 1 trillion yuan ($143 billion) quota of relending and refinance facilities, which was introduced by the central bank in the second quarter, should be extended to benefit more small and micro companies affected by the COVID-19 pandemic, said the PBOC statement.


The PBOC may be averse to further monetary policy easing. Instead, it is likely to use the reverse repo mechanism to alleviate liquidity strains arising from local government bond issuances, said Stephen Chiu, an Asia FX and rates strategist with Bloomberg Intelligence.


Since fiscal measures are crucial for economic recovery in the coming months, especially to boost fixed-asset investment, the monetary policy will continue to coordinate with the fiscal measures to maintain a relatively low level of financing costs for government and corporate debt, said the experts.


The PBOC also highlighted the need to control financial risks and said risk prevention mechanisms will be maintained over the longer term after the current three-year battle to contain financial risks ends.


"While policymakers are calling for a faster growth of credit, the real economic activities are still weak. This will lead to a large growth in macro leverage (the debt-to-GDP ratio) because of the mismatch between credit and the real economy. It will also boost financing arbitrage and asset prices," said Zhang Xiaojing, deputy head of the National Institution for Finance and Development, a government think tank.


The NIFD said that by June, China's macro leverage ratio had climbed to 266.4 percent, up from 245.4 percent at the end of 2019, due to the rising debt levels amid an accommodative monetary policy.





Heavy rain will turn its attention to North China this week after continuously battering the south over the past two months, according to meteorological officials.


Zhao Zhiqiang, deputy head of the disaster relief and public service department of the China Meteorological Administration, said at a news conference on Tuesday that there will be more rainfall in northern regions until Friday.


"Precipitation in areas along the Yellow and Huaihe rivers in northern and western China will be 50 to 100 percent more than that of the same period during normal years," he said, adding that some parts will experience hail and strong winds.


According to the administration, Shaanxi province may suffer from its heaviest rain since 1981.


Zhang Juan, a meteorologist with the administration, said that this bout of rain in Shaanxi, caused by a vortex that makes water vapor rise, may set records in some parts of the province.


"The long-lasting rainstorms are likely to trigger geological disasters, and local authorities should take precautionary measures," she said.


Rain moving northward will pose a flood risk to the upper and middle reaches of the Yellow and Songhua rivers.


"It is harder to guard against rainstorms for cities in the north due to their fewer experiences compared with the south," Zhao said."Proper prevention steps for short-term extreme precipitation, urban flooding, mountain torrents and mudslides should be taken."


Meanwhile, temperatures in southern China will remain high until Monday and could reach 40 C.


"The temperature in the south will be 1 to 2 C higher than the historic average," Zhao said. "High temperatures and high humidity will affect health as well as water and electricity supply."


On Tuesday, Hagupit, the fourth typhoon this year, landed in Yueqing, Zhejiang province.


The typhoon will move north through Zhejiang and Jiangsu provinces at 20 kilometers per hour as it subsides. It will leave Jiangsu on Wednesday and enter the Yellow Sea before moving toward the western coast of the Korean Peninsula, according to the administration.


The typhoon has brought heavy rain and gales to Wenzhou city in Zhejiang. On Tuesday, the administration issued an orange alert for the storm-the second highest of the four-tier color-coded warning system-alerting all ferry services in regions with high risks to suspend services.





As dawn broke on the western plateau in Sichuan province, Sanga and his family began to milk yaks that had been roaming in an alpine meadow.


Before the blazing sun hit its peak at noon, the herder, in his 50s, had returned home in his van with nearly 300 yuan ($42) after selling 20 liters of fresh yak milk in Nandamu township 30 kilometers away.


Two years ago, it would have taken him the entire day to make the round trip and the yak milk would have fetched less money.


Sanga lives in Wukeji village, Shangduke township, in Zamtang county of the Aba Tibetan and Qiang autonomous prefecture. Nandamu township is the nearest and most important market town for the herders.


Shangduke is set in alpine meadows, while Nandamu is located at the foot of a mountain. For years, the only access between the two townships was via a narrow meandering path.


When the herders wanted to sell their yak milk, meat and butter, they had to travel on horseback along a mountain trail or make a 70 km detour traveling on an asphalt road through Zamtang county.


"It took me five to six hours ride by horse to reach the town to sell milk. The price was 4 yuan for a half liter," said Sanga, who goes by only one name.


"Cheap prices were offered to us because the buyers knew that we had come a long way and if we didn't sell the milk, we wouldn't find any other buyers in time. The milk could go off and we might not make anything."


In October and September, the herders also drove yaks down the mountain to sell at market, which was a day's journey, Sanga said. Money had to be spent on accommodation and fodder if the herders had to wait for buyers, he said.


However, travel between the two townships became much easier when a 34-km paved road was completed last month.


The winding road drops from an altitude of 4,200 meters to 3,500 meters and connects 2,300 herders living in three villages to the trading township below.


"The travel time has been cut to a 30-minute drive by van," said He Dongming, deputy director of the transport bureau of the county."The milk is fresher when transported down the hill, so the sale price for milk has increased from 4 yuan to 7 yuan for a half liter."


He said it was no longer a buyer's market and if the herders were unhappy about prices offered for their products they could simply take them back home. The herders can also travel to other townships in the county to seek better prices for their products and customers can drive up the mountain and buy produce and goods directly.





Utilization of foreign investment in China rebounded in the first half of the year, and it rose 8.4 percent year-on-year in the second quarter, according to Securities Times on Wednesday.


As of Aug 4, 11 out of 12 provinces and cities that had released data on the actual use of foreign investment in the first half saw a year-on-year increase, except Guangdong, which also saw a narrowing rate of decrease.


Data shows Jiangsu actually used foreign investment worth $12.46 billion, up 0.2 percent year-on-year in the first half, ranking first among the 12 provinces and cities in terms of the amount of capital. Hainan, Heilongjiang and Fujian realized double-digit growth. Jiangxi's total cash inflow ranked ninth in China and first in Central China. Guangdong's actual use of foreign investment in high-tech services rose by 75.2 percent year-on-year.


Major projects have played a further prominent role in the use of foreign investment against the background of the COVID-19 pandemic. In the first half, 101 projects with actual investment above $30 million were launched in Jiangsu, up 20.2 percent year-on-year. In Fujian, 40 enterprises each received more than 100 million yuan ($14.34 million) in accumulated funds, totaling 17.9 billion yuan in the first half, up 36.9 percent from a year earlier. A total of 203 foreign firms from 30 countries and regions settled down in Hainan, including Rio Tinto, Charoen Pokphand and other top 500 firms from around the world.


Chen Bo, director of the Optical Valley Institute for Free Trade, said China has been the country with the most stable operations in the world in terms of its economic society due to excellent control of the COVID-19 epidemic, and it is the second-largest market which has preferably recovered from the pandemic. A recent survey by the Commerce Ministry showed 99.1 percent of foreign-invested firms said they will continue to invest and do business in China.





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