What rights do foreigners lack in China?
China's economy takes off after overcoming the corona crisis
China ended the 2020 corona year as the only G20 country with an economic plus. Growth of between 8 and 9 percent is expected for 2021. (As of March 22, 2021)
In China, the economy recovered faster than expected and picked up speed again from mid-2020. According to the "First in - First out" principle, the People's Republic was one of the few countries in the world whose economy grew even in the year of the Corona crisis. While China managed to successfully push the number of new infections down, the numbers continued to rise worldwide. The country now has few, locally restricted outbreaks.
For the Chinese government, a lot depended on mastering the crisis, as maintaining economic and social stability in the country is the top priority of its policy. According to experience from the global financial crisis, it did not open the "big rescue package for everyone", but it took a large number of targeted individual measures to support companies and consumption.
China's economy is recovering faster than expected
As a result, China's gross domestic product (GDP) grew by 4.9 percent in the third quarter and by 4.9 percent in the fourth quarter, following the historic slump in the first quarter of 2020 with a minus of 6.8 percent (second quarter: -3.2 percent) by 6.5 percent. While the global economy shrank by around 4.4 percent in 2020, according to the International Monetary Fund, China is the only G20 country that ended the year with growth of at least 2.3 percent. The Communist Party mainly credits its politics with this success. For 2021 - its 100th anniversary - due to the lower base, an economic increase of between 8 percent and 9 percent is expected in 2020.
Attractiveness for foreign investors grows
In light of this, many foreign investors view the Middle Kingdom as a safe haven. The Middle Kingdom overtook the USA as the largest recipient of direct investment during the corona crisis - according to a report by the Organization for Trade and Development of the United Nations. In 2020, foreign investment in the People's Republic rose 4 percent year-on-year, while in the US it slumped 49 percent. And this despite the fact that companies in China are increasingly becoming the plaything of political interests.
In addition, the demand for Chinese government bonds has risen sharply. The increased demand for the Chinese currency has meant that it has tended to appreciate against the US dollar since spring 2020. This trend is expected to continue.
Statistical revisions and indebtedness cloud the picture
But as always, it is worth taking a second look: Despite all the successes in combating the virus and the apparently successful restart of the economy, the numbers would be a little less rosy if the national statistical office (NBS) had not helped a little.
According to research by the South China Morning Post, a revision of older data meant that investments in fixed assets for the first nine months of 2020 showed an increase of 0.8 percent instead of a minus of 30 percent. The historical retail sales figures have been revised with a similar effect. According to the report, GDP in the 3rd quarter of 2020 would not have shown an increase of 4.9 percent but a decrease of around 5 percent if the old figures had been retained.
In general, the positive economic development is largely due to government spending - for example for the expansion of the infrastructure. The construction sector and its downstream areas benefited from this and from the further increase in real estate investments. Steel emissions rose by 22.1 percent in the fourth quarter of 2020 and cement production by 9.5 percent compared to the same quarter of the previous year.
Those responsible are often primarily concerned with the short-term increase in the current economic figures, and less with the efficient use of funds in the long term. In other words, the productivity of such investments is falling. At the same time, public sector debt has risen sharply - and the trend is rising.
The same applies to the increase in investments by state-owned companies. With easier access to finance, they increased their investments by 5.3 percent in 2020 compared to the previous year, while private sector investments rose by only 1 percent.
Private consumption is lagging behind
While the state creates demand with investments, private consumption is seen as the Achilles' heel of state economic planning. In order to stimulate the buying mood, the central and various local governments introduced various measures, including the issue of vouchers. In general, these were used with pleasure. But they do little to change the main cause of reluctance to buy, the uncertainty about how to proceed.
Automotive market is recovering
A certain exception is the motor vehicle market, which has since recovered well after the catastrophic first quarter of 2020 and in motor vehicles with internal combustion engines was only just under 2 percent below the previous year's sales. In 2020, sales of electric cars were almost 11 percent higher than in 2019. In order to support the sector, the government postponed the introduction of the national emission standard VI for light trucks by six months to January 1, 2021. Postponed car purchases became cheaper Prices and discounts have been made up since the 2nd half of 2020. Driving in your own car has become more and more attractive thanks to Covid-19.
Chemical industry is booming
The chemical industry is buzzing and is feeling the chase of important customer sectors that has started to catch up with the resumption of industrial production in the country. In the specialty chemicals sector in particular, the results for 2020 as a whole exceeded those of the previous year in some cases.
The picture in the health sector is mixed: While all Covid-19 relevant products in 2020 were and are being sold at home and abroad, demand in other areas, such as drugs for chronic diseases, is only slowly falling.
By Stefanie Schmitt | Beijing
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