China's economy is worse than it appears, and its vaccines, needed for a full recovery, are still in development, far behind America's. In the meantime, Beijing's response to the coronavirus, which includes the smearing of America, is resulting in China losing friends worldwide. (Photo by Justin Tallis/AFP via Getty Images)
The U.K.-based Centre for Economics and Business Research believes that, due to China's superior response to COVID-19, the Chinese economy will become the world's largest by 2028, five years earlier than previously forecast.
"For some time, an overarching theme of global economics has been the economic and soft power struggle between the United States and China," the Centre wrote in a December 26 report. "The COVID-19 pandemic and corresponding economic fallout have certainly tipped this rivalry in China's favor."
No, it has not. In fact, the opposite looks to be true. The Centre's prediction, which mimics one of Beijing's narratives, is more than just premature. It is based on fundamentally wrong assumptions.
China's economy is worse than it appears, and its vaccines, needed for a full recovery, are still in development, far behind America's. In the meantime, Beijing's response to the coronavirus, which includes the smearing of America, is resulting in China losing friends worldwide.
CEBR, as the Centre is known, believes there will be "a strong post-pandemic rebound in 2021" in the United States. The recovery will tail off with annual growth of gross domestic product of around 1.9% from 2022 to 2024. Yearly U.S. growth will then fall to 1.6% in following years.
China's recovery, according to CEBR, will be far more robust. The country will grow 5.7% each year through 2025. That figure will drop to a still-healthy 4.5% from 2026-2030.
CEBR's figures are not out of the mainstream. For instance, the International Monetary Fund estimates an 8.2% expansion next year. The World Bank pegs 2021 growth at 7.9%.
Those numbers, however, look widely optimistic. Government stimulus is powering much of the current growth as are net exports. Yet the current "flood of defaults" in China points to widespread weakness. Beijing's spending spree, therefore, is not sustainable, even with the help of foreign investment.
The sustainable portion of the economy — consumption — has never been as strong as advertised, but now it is far weaker due to the disease. Even official numbers paint a dreadful picture. Retail sales, a good proxy for internal consumer demand, fell 4.8% during the first eleven months of this year over the same period in 2019. Bellwether auto sales were off 2.9% for the January-November period. The consumer price index in November dropped 0.5%.
The just-released China Beige Book, a widely followed private survey, shows pronounced drops in sales growth in the luxury goods, food, and clothing sub-sectors in the fourth quarter of this year compared to the preceding one. Travel saw no growth at all, and hospitality was off as well. Moreover, the survey reveals the business community has a generally dour outlook on the Chinese economy as a whole, casting doubt on sunny predictions for 2021.
Chinese officials say life has returned to normal in China, but that is unlikely. State media celebrated the crowds in once-stricken Wuhan and noted it was the most-visited city during the Golden Week holiday at the beginning of October. Yet Wuhan reported that holiday revenue fell approximately 30% over last year. Moreover, even though the holiday was one day longer this year than in 2019, tourist spending nationwide was down a stunning 30%.
Ultimately, the economy will recover only when China has an effective and safe vaccine. Although the Chinese have had months of a head start, they are far behind America. The U.S. now has two vaccines that have received final FDA approval — the Pfizer-BioNTech one and Moderna's — and both have efficacy rates well over 90%. The Johnson & Johnson vaccine is on the way.
China's vaccines — Sinovac's and Sinopharm's — have yet to complete Phase 3 trials, and Beijing has been slow to release data. Interestingly, China is testing the vaccines mostly in other countries, including Morocco, Nigeria, the United Arab Emirates, Brazil, Turkey, Indonesia, and Chile. Mystifyingly, the various trials are not being conducted with the same protocols.
Beijing says people accept its two vaccines, which are being administered to tens of millions, but that is because people have no choice. In Hong Kong, a separately administered part of China, residents have a choice and anecdotal evidence suggests many of them are rejecting vaccination because they do not want the Chinese ones.
Today, there are coronavirus outbreaks around China — the latest is in Beijing — and the central government has employed lockdowns, mass testing, and contact-tracing. Not much else is known, unfortunately.
Why? The Communist Party is absolutely determined to control information. On January 26 of this year, it announced the Central Leading Small Group for Work to Counter the New Coronavirus Infection Pneumonia Epidemic, China's task force.
There was only one public health official on the initial nine-person roster, which was filled with political hacks, security types, and propaganda officials. The Party's propaganda czar, Wang Huning, was named vice chair. Therefore, supporting the Party's narrative was the primary goal of the ruling organization, which means information coming from China on the disease is suspect.
"Beijing's narrative is mutating faster than the virus itself," Claudia Rosett, foreign policy fellow of the Independent Women's Forum, told Gatestone.
At first, Chinese officials acknowledged the disease started in China, but since then they have suggested it came from Italy, Spain, India, or frozen-food packaging. In March, a foreign ministry spokesman stated patient zero was in the United States and intimated the U.S. Army carried the coronavirus to Wuhan, the epicenter.
These assertions were absurd, but almost nothing is too ludicrous for Chinese officials these days. As Rosett says, "At some stage, we'll be reading in the Communist Party press that the virus was cooked up in the kitchens and stored in the freezers of Mar-a-Lago, and it was only owing to Xi Jinping's extraordinary resolve that he did not catch it in 2017 from the chocolate cake."
Rosett is expressing a sentiment resonating just about everywhere. As the Wall Street Journal reported on December 28, China is fast losing support in capitals around the world.
It is not hard to figure out why. Chinese ruler Xi Jinping deliberately spread the virus beyond China's borders — by lying about the transmissibility of the disease and, while locking down Wuhan, forcing countries to take arrivals from China — and others are now starting to understand the maliciousness of the Communist Party.
Moreover, they are learning about its venality. For instance, China this spring sold Italy medical protective gear that Italians had donated to Beijing a few weeks earlier. "Foreign leaders cite complaints about the way Mr. Xi's government initially handled Covid-19," the Journal reported.
Beijing has not learned from mistakes this year, and these days, outlandish statements are evidently in vogue. In recent months, it has been working overtime to tar the U.S., even stating on December 28 that "disorder" in America at this moment was worse than at any time "since the founding of the U.S. in 1776." America, the Party's Global Times stated in the title of its editorial, is "Unrecognizable to the World in 2020."
In short, the Centre for Economics and Business Research missed the real story of China's response to the coronavirus. Beijing may have reaped temporary gains in the immediate wake of the disease, but more significantly it has, through malign and predatory actions, lost standing just about everywhere. China, for a sustained economic recovery, needs that support.
"China's GDP will overtake that of the U.S. sooner or later," the Global Times confidently stated on December 27 in another editorial, titled "China Surpassing U.S. in 2028 Is Faint Praise."
Overtake America? No, it won't.