It may appear ironic to say that China, where the first outbreaks of Covid-19 was reported, has done (relatively) well economically from the virus but there is some good evidence out there that this is the case. Of course in these topsy-turvy times everything is relative and China suffered its first decline in GDP for decades in the first quarter of the year but it has bounced back strongly and is forecast to grow by 5.8% in the last quarter of 2020. This will leave it as the only major economy to show annual GDP growth in the year; every other one has suffered a lesser or greater decline. In fact the country has just seen its highest monthly trade surplus on record. Exports in November when expressed in dollar terms were 21.1% higher than the same period last year, showing the fastest rate of growth since 2018. Not for the first time this performance caught analysts by surprise, being nearly 10% above expectations.
The export boom is helping to drive China's economic bounce back. The trade surplus stood at a massive $75.4 billion at the end of November, the highest on record and about $17 billion up from the previous month. The sense of irony is added to by the fact that the global boom in purchases of personal protective equipment (PPE) has benefited China greatly. Analysts from Oxford Economics, a leading economic forecaster, noted that this might be a one-off effect though; as vaccines start to roll out then demand for PPE may well drop and there are already suggestions in some countries that, after the massive problems of supply earlier on in the pandemic, there are already excess stocks of it. Nevertheless the economic performance of the country this year is comparatively speaking extremely strong. Chinese imports are also growing but much more slowly than the rate of export increase, hence the record surplus.
But just as one source of exports might start to dry up, another very topical one may take its place. China has also been investing heavily in vaccine development and seems to have an eye on focusing on sales to the developing world amongst others. This week the UAE approved China's Sinopharm vaccine, assessing it as 86% effective. Chinese vaccines have been on trial in various countries around the world including Indonesia, Brazil, Pakistan and Chile. This week the Chinese pharmaceutical company Sinovac secured a cash injection of over $500 million and hopes to be able to use this to scale up production once clinical approval of its vaccine is given. The vaccines have a major advantage over international competitors in that they do not need to be stored at extremely low temperatures like some others so it should prove attractive if approval is given. Sizeable volumes have already been shipped overseas pending approval for their release including 1.2 million doses delivered to Indonesia last weekend. To put this in perspective though a leading adviser to China's State Council, Wang Junzhi, recently announced that it was expected that 600 million doses would be available by the end of the year. With this new product line about to come onstream, one thing seems clear. Whilst the pandemic might have interrupted the Chinese economy earlier in the year, it does not at the moment seemed to have done much to halt the country’s seemingly inexorable economic surge in the longer term.
Wayne Bartlett is an author for accountingcpd. To see his courses, click here.