A look at China’s economy over the past two years of the pandemic

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A view of the Lujiazui area in Shanghai, eastern China. /Xinhua

A view of the Lujiazui area in Shanghai, eastern China. /Xinhua

Editor’s note: John Gong is a professor at the University of International Business and Economics (UIBE) in Beijing and a research fellow at the China Academy of Open Economy Studies at UIBE. The article reflects the opinions of the author and not necessarily the views of CGTN.

2021 will go down in history as another pandemic year. Officially, the scourge of COVID-19 has surpassed the 1918-1919 Spanish Flu in terms of duration, and for many countries in terms of total deaths as well. For example, in the United States, more than 820,000 people had died by the end of the year from COVID-19.

In China, the government has so far stuck to the “dynamic zero-COVID” policy. Since the third quarter, when winter arrived, the economy was inevitably battered, as China could not be immune to the wild spread of the Delta and Omicron variants to the rest of the world.

Nevertheless, this policy saves lives above all else. Officially, the total death toll since the outbreak in Wuhan has been kept below 5,000. China unarguably ranks among the top performers in the world in terms of successfully handling the pandemic.

GDP growth started the year with a blockbuster 18.3% for the first quarter, followed by 7.9% for the second quarter. In the third quarter, the momentum began to falter as the variants of COVID-19 started to come ashore: 4.9% for the third quarter was well below expectations. The fourth quarter may be even lower. If this is indeed the case, the full year figure could still be around 8% GDP growth, which means, combined with last year’s 2.3% growth rate, that the two pandemic years average more than 5% per year. This is still an extraordinary achievement compared to many countries in the world.

Workers weld at a workshop of an automobile manufacturing company in Qingzhou city, east China’s Shandong Province, Feb. 28, 2021. /Xinhua

Workers weld at a workshop of an automobile manufacturing company in Qingzhou city, east China’s Shandong Province, Feb. 28, 2021. /Xinhua

In a counterfactual sense, suppose we didn’t have COVID-19 at all. Consensus expectations would place the Chinese economy at an annual growth rate of 6-6.5%. But in reality, we’ve only averaged 5% over the past two years. The essence of this pandemic is therefore to cause China’s growth rate to fall by 1 to 1.5%. In dollars, that would translate to a loss of GDP of $177 billion to $265 billion this year.

There are several interesting implications if my predictions here are correct. First, GDP per capita in China is expected to reach $12,500, partly helped by RMB appreciation and partly by the declining population trend. The World Bank’s GNI classification system sets the threshold for high-income countries at $12,700. It is therefore almost certain that next year, China will become a member of the high-income club of some 70 countries.

The size gap between the US economy and the Chinese economy has also narrowed considerably. China accounted for around 70% of US GDP at the start of 2020, but has now reached around 78%. Next year, it is very likely that China will represent more than 80% of the American economy. When will China finally catch up with the United States in this regard? I always stick to the end-of-decade forecasts, which seem conservative and possibly even earlier.

Going forward, the first quarter of 2022 will still be a difficult period. The pandemic shows no signs of ending and China will host the Winter Olympics, which means the strict pandemic measures will still be in place and strictly enforced. The economy, especially the service sectors, will continue to be under pressure. Hopefully by Q2 the tide will turn, and I also hope COVID-19 is finally behind us – for good.

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