Post-COVID China: recovery and the demand gap

For China to really get production going and help drive the global recovery, the rest of the world will need to come to the party, according to Raymond Yeung, ANZ Greater China Chief Economist. Partying though appears not be imminent: as the global economy continues to pick up the pieces of the COVID-19 crisis, demand remains weak.

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Speaking on an ANZ customer call with ANZ Chief Economist Richard Yetsenga, Yeung said the lack of demand would result in slower output for at least the next few months, shaping China’s short-term economic outlook.

" Everybody is trying to bring production back online, but yet demand is still quite weak. So this gap in China is actually being replicated elsewhere.” – Richard Yetsenga

“There has been some pent up demand [from] February and… that's resulted in an increase in industrial production,” he said. “And actually, there was a positive surprise in the monthly data in April.”

“But the lack of demand, because of the global pandemic, will continue to result in slower production over the next one or two months, until other countries, for example, the US or Europe, get back to normal, or open their economies.”

You can hear an edited version of the call below. (Note the call was in late May, during China’s National People’s Congress.)

Yetsenga said a key driver of the recovery around the world, and the pace at which this would occur, would be production.

“Of course, everybody is trying to bring production back online but demand is still quite weak,” he said. “So this gap in China is actually being replicated elsewhere. I think it is one of the factors that will slow the recovery out of this crisis.”

Yeung said China is aware of the production issue and more focussed on the longer term.

“Policymakers already know they cannot count on exports,” he said. “They know the biggest growth driver should be coming from [inside China]. This is what the government will count on - more emerging-industry domestic activities will drive the economy.”

Yeung said a key element of China’s economic policy is aimed at improving wellbeing.

“Over the next, not only five years, 10 years, and even 20 years down the road, the emphasis is on quality and efficiency,” he said.

In a wide-ranging discussion, the two experts also spoke about China’s economic targets, plans for the Renminbi and the National People’s Congress. Listen to a podcast above to find out more.

Shane White is Institutional Content Manager at ANZ

This article was originally published on ANZ’s Institutional website

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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