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China’s Economy Did Well in 2020


The numbers are in—China’s economy grew 2.3% in 2020 while the U.S.’s shrank about 3.5%—and they’re misleading.To get more latest china economy news, you can visit shine news official website.

Despite the extreme divergence, the U.S. economy performed better by many of the most important measures. That’s all the more impressive considering China’s superior handling of the coronavirus pandemic that originated in Wuhan.The upshot: The U.S. should be in better shape as the world recovers in the years ahead.

The initial impact of the virus was almost identical everywhere, with economic output falling 20% to 30% before gradually recovering. But the recoveries in each society have differed depending on how each government responded to the economic hit from the virus.In China, the government refrained from helping workers and ordinary households directly. Instead, the government supported politically connected businesses and local governments through cheap credit and helped exporters by intervening to prevent the currency from appreciating.

Total “aggregate financing to the real economy” rose by 35 trillion yuan (around $5.4 trillion) in 2020, compared with 26 trillion yuan in 2019 and just 19 trillion yuan in 2018. The uptick was driven by state-backed bank loans and by a surge in local government bond issuance.

At the same time, Chinese state-controlled banks and the People’s Bank of China have been aggressively purchasing foreign assets, almost certainly to manage the exchange rate. Since April, the big banks have bought $137 billion of foreign assets and repaid $20 billion in foreign debts, while the PBOC itself has added $234 billion in foreign exchange assets. In other words, Chinese government-connected entities have bought nearly $400 billion in foreign currency in the space of eight months, or almost $600 billion at an annual rate. That’s substantially higher than the rate of reserve accumulation the PBOC reported in the peak manipulation years from 2006 to 2011.
Thus, even though the yuan has gained about 10% against the dollar since the pandemic began, it’s been essentially flat against the trade-weighted basket that the government targets. Absent any intervention, China’s currency would have appreciated far more against the currencies of its trading partners to reflect the decline in the prices of commodities that China imports and the Chinese government’s relative success at containing the pandemic.