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Chinese GDP Strong Bounce Good News for Global Growth

Posted: Friday, October 23rd, 2020

Estimated Reading Time: 2 minutes

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The Chinese GDP posted a strong performance for the third quarter. It grew by 4.9%, following another 3.2% growth in the previous quarter.

For the world economy, the strong bounce of the Chinese economy is nothing but good news. In fact, it helps not only the regional economies but the global economy as well.

The Chinese GDP recovery puts the economy back on track to grow for the year. As such, China is on track of delivering a bigger than 2% economic growth for the entire 2020 – a staggering performance by all metrics considering the pandemic.

Chinese GDP

Manufacturing Leading the Chinese GDP Recovery

Unsurprisingly, the manufacturing sector’s growth outpaced services growth. Most of the Chinese exports in the third quarter were goods related to the pandemic. However, not only personal protective gear but also hardware for remote work.

As people across the globe were forced to work from home during lockdowns, the trend continues unabated. As such, the need grew to build a home office. Therefore, China delivered computers and communication equipment the world needed.

The rebound in global demand also puts China at a competitive advantage when compared to other parts of the world. It appears that the Chinese have defeated the virus with strict control measures and now stand ready to become the world’s leading manufacturer again.

In other parts of the world (e.g., Eurozone), economies face a tough time. A study ran by McKinsey estimates that half of the small and medium enterprises in Europe will face bankruptcy in the second half of 2021, should the economy not improve.

Guess who is ready to fill the gap for delivering the missing goods?

Services Recovered Only Gradually

China has long stopped being only a manufacturing-driven country. The last decade showed a country that expanded the services sector at great speed.

While the services sector was affected to capacity limitations triggered by the pandemic, the sector is on track to full recovery. For example, domestic tourism posted a strong comeback and looks on track to recover to pre-COVID levels sooner rather than later.

Looking forward to the fourth quarter, the Chinese GDP will likely grow further. China benefits from its success in dealing with the virus and acts as a supplier of goods to the rest of the world.

Moreover, Chinese-developed vaccines will likely be available locally very soon. If successful in combating the virus, it will put the Chinese economy one leg ahead of competitor economies.

To sum up, the solid Chinese economic recovery is good news for global growth. It helps the flow of goods to parts of the world where they are needed the most.

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