- Posted by Admin Website ALMI
- On 5 April 2020
- 0 Comments
After reducing local cases of COVID-19 to zero, it appears urgent for China to help other affected countries to help the world’s most populated country recover its economy.
Over 40 economists, based both in and outside mainland China, forecast China’ economic growth to fall to an average of 3.5% this quarter from 6.0% in the fourth quarter of 2019, a full percentage point lower than predicted in a Feb. 14 poll due to the COVID-19 pandemic.
Despite this gloom prediction, many have predicted that China’s economy will bounce back soon following the resumption of factories and companies post-outbreak.
However, we should not forget that China, the world’s largest exporter, needs the rest of the world to recover its economy.
There are at least two factors why China’s dependency on the global economy is huge: China’s large amount of exports to other countries and
the continuity of its Belt and Road Initiatives (BRI), China’s massive infrastructure projects, which are many located in countries affected by COVID-19.
To ensure its economic recovery, China should assist countries involved in the (BRI) initiative and improve its relationship with its biggest export destination, the United States.
China’s high exports
China’s export activities are significant for its economy as it accounts for almost a fifth of China’s GDP.
The latest data from Trade Map show that China’s goods exports account for 12.4% of the total global goods imports in 2018, or worth about US$2.49 trillion.
The US is China’s number one export destination, accounting for 20% of China’s exports, followed by Hong Kong (12%), Japan (6%), South Korea (4.5%) and Vietnam (3.4%), according to data from tradingeconomics.
As the world heads towards recession that according to IMF Managing Director, Kristalina Georgieva would at least be as bad as the 2008 global financial crisis where global GDP growth was at minus 1.6%, the lowest since the 1930 Great Depression, export demands from China’s trading partners have dropped.
To recover its economy, China must also see the economy of its export destination countries improve, especially the US, Hong Kong, Japan, South Korea and Vietnam, as China’s top five export destinations.
The BRI must go on
China also needs to ensure the continued implementation of the BRI, especially in countries hit by the COVID-19 pandemic along the BRI routes to save its economy.
Since the disease outbreak, many countries have delayed the implementation of BRI projects as they focus on containing the spread of the virus in their regions.
In some countries, the projects are stopped because Chinese engineers and workers have not been allowed to re-enter the host countries.
In Italy, BRI projects are halted since the first case of COVID-19 found in the country.
In Indonesia, the construction of a high-speed railway linking capital Jakarta and Bandung, in West Java and the building of a dam in the Batang Toru rainforest, North Sumatra have been suspended. A ban on flights from China stopped Chinese workers from returning to the construction sites.
BRI projects play an important role in China’s economy as the BRI countries are not only China’s trading partners but also its gateways for China to enter regional markets.
BRI projects in Italy give China access to European markets. In 2018, Italy imported 6% of its goods from China, or equivalent to around US$33 billion in 2018. Italy has been a crucial destination for Chinese investments, particularly in the fashion industry.
In Southeast Asia, Indonesia is one of the key countries for BRI projects in the region.
Yet, as Southeast Asian countries are struggling to deal with the COVID-19 pandemic, China’s BRI projects are also at risk, harming its economy.
The way forward
One thing that China can do to speed up its economic recovery is by prioritising giving assistance to BRI countries.
China can send its medical personnel and kits. China has sent medical supplies to countries in South and Southeast Asia. But China should also consider expanding its assistance to other regions.
China can also share its lessons learned on how to contain the spread of the virus.
Next, China should fix its relationship with the US, which has been fractured since both engage in a trade war.
Improved China-US relations would not only help both countries recover their economy, but also other BRI countries.
China and the US have dominated almost a quarter of the global trade. A robust Beijing-Washington tie will accelerate export activities in other countries. BRI countries as China’s major exporters will also get benefit from the China-US healthy relations.
Chinese President Xi Jinping has indicated this possibility of mending the relationships of two countries through his recent phone call with Donald Trump, urging Washington to improve ties with Beijing.
Thus, let us hope that Trump would consider Xi’s offer.
Rusli Abdulah bekerja di INDEF – Institute for Development of Economics and Finance.
Muhammad Zulfikar Rakhmat terafiliasi dengan Institute for Development of Economics and Finance (INDEF).