#186 Current China Economics

The real GDP of China has been subjected to wide gyrations in 2020. After dropping by 40% if the 1st quarter it recovered by close to 50%. This reflects a drastic total lockdown of China and subsequent recovery - with minimum COVID losses.

COVID did not cause a reduction in the GDP. The positive trade balance had declined since 2018 and remained close to +$400 billion positive even during the drop early in 2020.

These trends are apparent from the persistence of the China export trade even as the trade balance decreased from 2016 to 2018 largely on account of reduction of trade with the US.   

The continuation in the positive balance of trade of China can be contrasted with a steady worsening of the US balance of trade:

The US imported large quantities of goods made by cheap China labor for immediate profits and traded that for acquisition of technology know-how that delivered long-term benefits. In this process China retained long term reserves as $1.5 trillion of increased US debt.

The great disparity between the financing of growth of China and the US can be seen from a much greater dependence on bank loans in China and the US. China funded increases in productive assets through $25 Trillions through locally (e.g. decentralized) administered bank loans whereas the US relied on centrally managed $10 Trillion.

Summary:

China has recovered from COVID, unlike any other economy, to resume positive GDP growth. One of its strength - a positive balance of trade - remained unaffected.