China’s Economic Rebound : The Good, the Bad and the Ugly

Has China’s economy really recovered from the 2020 Pandemic?

The COVID-19 pandemic has had a severe impact on the global economy. With many countries enforcing lockdowns to curb the pandemic, there has been a serious disruption in the global supply and demand chains. Unemployment levels, too, are on the increase, as it becomes difficult for businesses to operate with rising costs. As a result, a lot of countries started experiencing drastic economic slowdowns already. On October 13, 2020, the International Monetary Fund predicted that the world economy would shrink by 4.4 per cent in 2020, signalling an intense global recession (The Tribune, 2020). The result being major economies having taken a big hit during the pandemic.

The USA recorded -5.0% and -31.4% GDP growth rate in its 1st and 2nd quarter respectively (Bureau of Economic Analysis, 2020). A big contributor to such dipping GDP figures was unemployment rates in the USA reaching figures of 3.83% and 13.03% in the respective quarters (Statista Research Department, 2020). The UK too saw its economy crashing as it witnessed GDP growth rates of -2.5% and -19.8% in the 1st and 2nd quarter respectively (Reuters, 2020). The Indian economy wasn’t spared either, as it recorded a contraction of 23.9 % in its 1st quarter (The Economic Times, 2020).

Interestingly, China has been the only major economy which despite seeing a contraction of 6.8% in its 1st quarter, saw its economy growing by 3.2% and 4.9% in its 2nd and 3rd quarter, respectively. The IMF had also predicted that China would grow by 1.9 % in 2020, making it the only major economy which would see itself expanding in the last year (Krishnan, 2020). Many components have been responsible for its growth despite the dire circumstances.

Source: Scroll In. (2020). In charts: India’s GDP shrinks more than other major economies. 

For quite a while now, China has depended on the export-led growth model to expand its economy. Despite the damaging impacts of the pandemic, China’s exports weren’t hampered for long. Data suggests that its exports  dramatically rose from a 0.4 % growth in exports in June to  11.4% growth in October, when compared to last year. According to Xing Zhaopeng, an economist at Australia & New Zealand Banking Group, electronic exports, including new iPhones, had a crucial role to play in export growth in October (Bloomberg, 2020).  For instance, China is the primary manufacturing hub for Apple products though designed in the United States. In addition to this, medical equipment exports grew by 43% in the first 10 months last year, when compared to 2019, and the export of textiles, yarn, fabrics and other related goods also increased by 32% (Bloomberg, 2020).

In spite of struggling in retail sales in the first two quarters, with negative growth of 19% and 3% in the respective quarters, China bounced back and grew by 3.3 % in the retail sector by September. As one of the first countries to bring the pandemic under control, China’s retail sales got a boost when lockdowns across the country were lifted. With a reduction in reported weekly cases, malls, restaurants and gyms also began functioning as per normal and have been visited in great numbers since August. For instance, official data shows that during the last ten days of August, box-office revenue returned to 90% of 2019 levels (J. Cheng, 2020).

Further, industrial production played a big role in China’s recovery. While the first quarter witnessed a decline of 8.4% in the production sector, there was a growth of 6.9% by the third quarter . Therefore, the economic recovery made by China has been enviable and admirable. 

Illustrated by Prishi Jain

However, while these could be considered great indicators when appraising the economic recovery of China, there are still many other factors at play which paint a completely different picture. According to the National Bureau of Statistics of China, the top statistical body in China, the monthly jobless rate for an individual aged between 20 to 24 has risen by 4% in September, when compared to the same time period last year (Leng, 2020).

Furthermore, not all parts of China have recovered from the devastating economic impact of the pandemic. An independent survey of more than 3,300 businesses in China between August and September of 2020 was conducted by the firm China Beige Book, and its report stated that only large firms and firms based in the coastal regions surrounding big cities (like Shanghai, Beijing and Guangdong) experienced an acceleration in their growth. The report stated, “Small and medium-sized enterprises and companies outside the core are earning, selling, investing, and borrowing far less than their counterparts.’’ (E. Cheng, 2020)

A further probe by China Beige Book revealed that revenue and profit in every region decreased by double-digits in the 3rd quarter, when compared to last year. On the other hand, landlocked regions witnessed a decline in output and domestic orders, when compared to the 2nd quarter (E. Cheng, 2020).

Additionally, the consumer market in China stands divided since premium goods have consistently outperformed goods targeting mass-market consumers. Although global luxury brands saw a fall in their demand, luxury brands in China, in fact, benefited and observed an increment in demand. Luxury goods are relatively cheaper abroad, when compared to within China. However, since well-to-do consumers could not buy imported luxury goods due to travel restrictions, they needed to rely on brands and products produced and available in stores in China. For instance, when Chinese liquor and tobacco sales decreased by 3% between January and June last year, premium labels still thrived; with the likes of Kweichow Moutai Co.— a Chinese producer of top-quality spirit— experienced an increase in revenue by 13% and 9% in the first and second quarters, respectively (Moss, 2020).

Source: Shicong, D. (2021). Yicai Global. 

The pandemic has brought to light the glaring differences that exist between white-collared and blue-collared workers in China. According to the Chinese Academy of Social Sciences, while white-collared workers could hold on to their jobs as they could work from home, approximately eighty million low-income earners belonging to service and manufacturing sectors were left unemployed (Moss, 2020). And this is a phenomenon that can be identified all over the globe. For example, the UK’s unemployment rate was 4.6% as of November 2020, which is its highest recorded figure of unemployment since 2016 (Times of India, 2020). Furthermore, surveys conducted by Ant Group Co. and China Household Finance Survey discovered that the wealth of poor families dipped in the first half of 2020, whereas families with higher incomes witnessed gains  (Xie, 2020).  

Lastly, China has been experiencing serious levels of household debt. According to Wind Info, China’s household leverage ratio, calculated by taking household debt as a percentage of GDP, rose to a historic figure of 59.7% in June, last year. (Xie, 2020). In 2014 and 2015, when the economic growth in China began to slow down, the Government encouraged household borrowing; a trend which has continued until today. Also, from Q3 2017 to Q4 2018, lending to households outperformed lending to corporates as mortgage interest rates were much higher than corporate lending rates (Wright & Feng, 2020).

Despite these drawbacks, UBS (a multinational investment banking co.) has already forecasted that the Chinese economy would further grow by 5.5% by the end of the financial year of 2020. But given everything, the questions remain— do such figures and quantitative data highlight the actual economic development? Do they take into account the hardships that a sizable section of people are still facing in China? Thus, we must ultimately ask ourselves, whether China’s economy has really recovered from the debilitating effects of the pandemic so far, or not?

– Abhinav Nath Jha (Writer, Econ Declassified)

Edited by: Sanika Sawant (Editor, Econ Declassified)


Bloomberg News. (2020, November 09). Chinese Exports Growth Accelerates in October, Imports Rise.

Bureau of Economic Analysis.(n.d.). U.S. Economy at a Glance.

Cheng, E. (2020, September 24). Not all of China is recovering from the economic hit from coronavirus at the same rate, survey finds.

Cheng, E., & Tan, H. (2020, April 17). China says its economy shrank by 6.8% in the first quarter as the country battled coronavirus. CNBC. (Accessed October 22, 2020) 

Cheng, J. (2020, September 15). China’s Economy Picks Up Speed as Shoppers, Moviegoers Return.

Krishnan, A. (2020, October 19). China GDP growth accelerates to 4.9%. Retrieved October

Leng, S. (2020, October 21). China’s economy surges ahead, but young jobseekers face being left behind.

 Moss, T. (2020, August 19). Premium Retailers Ride China’s Recovery From Covid-19 Crisis.

Reuters. (2020, September 30). UK GDP collapsed nearly 20% in Q2 in historic Covid hit.

Statista Research Department. (2020, November 26). Quarterly unemployment rates in developed and emerging countries 2020.

The Economic Times. (2020, September 02). GDP growth at -23.9% in Q1; first contraction in more than 40 years. 

The Times of India. (2020, November 10). UK unemployment rate: UK unemployment rises increases to 4.8%, highest since 2016.

The Tribune. (2020, October 13). World economy in deep recession in 2020, growth to be -4.4 per cent: IMF.

Woodhouse, A., Hale, T., & Liu, X. (2020, July 16). Chinese GDP grows 3.2% in second quarter.

Wright, L., & Feng, A. (2020, May 11). COVID-19 and China’s Household Debt Dilemma.

Xie, S. (2020, October 21). China Beat Back Covid-19, but It’s Come at a Cost-Growing Inequality.

Photo Credits

Renminbi by Mitchell Luo. Unsplash.

Shicong, D. (2021). Distiller Kweichow Moutai Is China’s Most Valuable Brand for Third Year, Hurun Says. Yicai Global. 

Scroll In. (2020). In charts: India’s GDP shrinks more than other major economies.

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