(Antfer) #1

8


 REMARKS


○ If anything was going to get in the
way of China’s rise, it was Covid-19.
The country shuddered but kept goi

○ By Tom Orlik


Pops


critical driver of China’s construction boom—plummeted. Tax
revenue and land sales, which are the main source of revenue
for local governments, followed them down. Workers faced
rising unemployment and shrinking incomes. The official data
showed the jobless rate rising above 6%. Cynics assumed the
realitywasworse.
Inthegrizzlybearnarrative,thearchvillaininChina’secon-
omyis debt.A four-trillion-yuan($565billion)stimulusthat
startedasa powerfulresponsetothe 2008 greatfinancialcri-
sisrantoostrongfortoolong.Debtfortheeconomyasa whole
roseprecipitately—climbingfrom140%ofGDPin 2008 allthe
wayto260%in2019.EveryonefromInternationalMonetary
FundpolicywonkstoWallStreetmoneymanagerstoChina’s
owncommunistcadreswerewarningofa dangerousbubble.
Thebiggestborrowers—state-ownedenterprises,realestate
developers,localgovernments—weretheverysamegroups

Don’t tell President Trump, but China is winning.
The U.S. has thousands of new Covid-19 cases a day. China’s
reported daily case count is down to double digits. The U.S. is
braced for an historic 6% contraction in gross domestic prod-
uct. China’s rapid rebound means it’s poised for another year
of growth—and a speedier catch-up in the race to overtake
the U.S. as the world’s biggest economy. America’s interna-
tional standing has seldom been lower. From the corridors of
the World Health Organization to the protest-ridden streets
of Hong Kong, China’s global clout increases.
For many, China’s world-beating rebound must come as
a surprise. To read the history of China analysis in the last
30 years is to be bombarded with predictions of imminent
demise. Sure, the skeptics conceded, double-digit growth
looked impressive. But, they said, just poke beneath the
surface, and the reality was an unsustainable bubble. The
authoritarian political system was too constricting for the
economy to truly thrive. Banks were stuffed with bad loans.
The industrial landscape was littered with zombie compa-
nies, the urban landscape with ghost towns.
At first, it appeared Covid-19 would confirm that narra-
tive. Reports about a virus contracted from bats and spread
in a crowded wet market confirmed prejudices about a prim-
itive and backward people. The story of Dr. Li Wenliang—the
whistleblower who tried to alert China’s authorities but had
been silenced—affirmed the superiority of the open U.S. sys-
tem. Footage of mechanical drones barking “go home” at
lockdown dodgers added fears about the rise of a surveil-
lance superstate.
The lockdown hammered China’s economy. With facto-
ries closed, profits for state-owned enterprises slumped, fall-
ing close to 50% in the first months of the year. Home sales—a

e


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ILLUSTRATION BY 731. DATA: COMPILED BY BLOOMBERG

China’sCrisisResponse
WHO
identifies
Covid-
virus

Shanghai
Composite Index

China
reports
first death

Wuhan
quarantined

PBOC adds
500-billion-
yuan
relending
quota

PBOC cuts
rates by
10 basis
points

Joint statement
from regulators
promises support
for market
Markets reopen
PBOC injects
1.7 trillion yuan
in liquidity

Extended
Lunar NewYear
holiday

Dec. 31, 2019
3,