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With Covid-19 Under Control, China’s Economy Surges Ahead – The New York Times

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BEIJING — As most of the world still struggles with the coronavirus pandemic, China is showing once again that a fast economic rebound is possible when the virus is brought firmly under control.

The Chinese economy surged 4.9 percent in the July-to-September quarter compared with the same months last year, the country’s National Bureau of Statistics announced on Monday. The robust performance brings China almost back up to the roughly 6 percent pace of growth that it was reporting before the pandemic.

Many of the world’s major economies have climbed quickly out of the depths of a contraction last spring, when shutdowns caused output to fall steeply. But China is the first to report growth that significantly surpasses where it was at this time last year. The United States and other nations are expected to report a third-quarter surge too, but they are still behind or just catching up to pre-pandemic levels.

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China’s lead could widen further in the months to come. It has almost no local transmission of the virus now, while the United States and Europe face another accelerating wave of cases.

The vigorous expansion of the Chinese economy means that it is set to dominate global growth — accounting for at least 30 percent of the world’s economic growth this year and in the years to come, Justin Lin Yifu, a cabinet adviser and honorary dean of the National School of Development at Peking University, said at a recent government news conference in Beijing.

Chinese companies are making up a greater share of the world’s exports, manufacturing consumer electronics, personal protection equipment and other goods in high demand during the pandemic. At the same time, China is now buying more iron ore from Brazil, more corn and pork from the United States and more palm oil from Malaysia. That has partly reversed a nosedive in commodity prices last spring and softened the impact of the pandemic on some industries.

Still, China’s recovery has done less to help the rest of the world than in the past because its imports have not increased nearly as much as its exports. This pattern has created jobs in China but placed a brake on growth elsewhere.

China’s economic recovery has also been dependent for months on huge investments in highways, high-speed train lines and other infrastructure. And in recent weeks, the country has seen the beginning of a recovery in domestic consumption.

The affluent and people living in export-oriented coastal provinces were the first to start spending money again. But activity is resuming now even in places like Wuhan, the central Chinese city where the new coronavirus first emerged.

“You’ve had to line up to get into many restaurants in Wuhan, and for Wuhan restaurants that are popular on the internet, the wait is two or three hours,” said Lei Yanqiu, a Wuhan resident in her early 30s.

Credit…Hector Retamal/Agence France-Presse — Getty Images

George Zhong, a resident of Chengdu, the capital of Sichuan Province in western China, said that he had made trips to three provinces in the past two months and has been actively shopping when he is home. “I spend no less than in previous years,” Mr. Zhong said.

China’s economic growth in the past three months came in slightly below economists’ forecasts of 5.2 percent to 5.5 percent. But the performance was still strong enough that stock markets in Shanghai, Shenzhen and Hong Kong rose in early trading on Monday.

The country’s broadening recovery could also be seen in economic statistics just for September, which were also released on Monday. Retail sales climbed 3.3 percent last month from a year ago, while industrial production was up 6.9 percent.

China’s model for restoring growth may be effective, but may not be appealing to other countries.

Determined to keep local transmission of the virus at or near zero, China has resorted to comprehensive cellphone tracking of its population, weekslong lockdowns of neighborhoods and cities and costly mass testing in response to even the smallest outbreaks.

Credit…Carlos Garcia Rawlins/Reuters

China’s rebound also comes with some weaknesses, particularly a surge in overall debt this year by an amount equal to 15 to 25 percent of the economy’s overall output. Much of the extra debt is either borrowing by local governments and state-owned enterprises to pay for new infrastructure, or mortgages taken out by households and companies to pay for apartments and new buildings.

The government is aware of the risk of letting debt accumulate quickly. But reining in new credit would hurt real estate activity, a sector that represents up to a quarter of the economy.

Another risk to China’s recovery is its heavy dependence on exports. The surge in exports in the past three months, along with lower prices for imports of commodities, accounted for a big chunk of economic growth, one of the largest shares of any quarter in a decade. Exports still represent over 17 percent of China’s economy, more than double the proportion that they make up in the American economy.

China’s leaders recognize that the country’s exports are increasingly vulnerable to geopolitical tensions, including the Trump administration’s moves to unwind trade relations between the United States and China. Shifts in global demand might also threaten exports, as the pandemic batters overseas economies.

Credit…Jane Barlow/Press Association, via Associated Press

Xi Jinping, China’s top leader, has increasingly emphasized self-reliance, a strategy that calls for expanding service industries and innovation in manufacturing, as well as enabling residents to spend more.

“We need to make consumers the mainstay,” said Qiu Baoxing, a cabinet adviser who is a former vice minister of housing, at the news conference in Beijing. “By focusing on domestic circulation, we are actually enhancing our own resilience.”

But empowering consumers has long been a challenge in China. Under ordinary circumstances, most Chinese are compelled to save for education, health care and retirement because of a weak social safety net. The economic slowdown, and the pandemic, have meant lost jobs, compounding the problem, particularly for low earners and rural residents.

Beijing’s approach to helping ordinary Chinese during the slowdown has been to provide companies with tax rebates and large loans from state-owned banks, so that businesses would not need to lay off workers. But some economists argue that Beijing should instead be handing out coupons or checks to more directly assist the country’s poorer citizens.

Millions of Chinese migrant workers endured at least a month or two of unemployment in the spring as factories were slow to reopen after the epidemic. Young Chinese found themselves dipping into their savings to eat or taking on second jobs to make up for slashed wages.

But Chinese government economists are wary of providing direct payments to consumers. They say that the government’s priorities are investment-driven growth and measures to improve productivity and quality of life, such as digging new sewerage systems or adding elevators to three million older apartment towers that lack them.

Credit…Keith Bradsher/The New York Times

“We’ve seen a lot of suggestions to increase consumption, but the crux is to enrich people first,” said Yao Jingyuan, a former chief economist of the National Bureau of Statistics who is now a policy researcher for the cabinet.

Western governments have experimented with providing extra-large unemployment checks, one-time payments and even subsidized meals at restaurants. These payments have been aimed at helping families sustain a minimum standard of living through the pandemic — which in turn has fueled demand for imports from China.

Michael Pettis, a finance professor at Peking University, said that as people in other countries supported by government subsidies continue to turn to China for products during the pandemic, “we’re going to see a resurgence of trade conflict, and not just U.S.-China, but global.”

Liu Yi and Amber Wang contributed research.

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Economy

China Wants Everyone to Trade In Their Old Cars, Fridges to Help Save Its Economy

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China’s world-beating electric vehicle industry, at the heart of growing trade tensions with the US and Europe, is set to receive a big boost from the government’s latest effort to accelerate growth.

That’s one takeaway from what Beijing has revealed about its plan for incentives that will encourage Chinese businesses and households to adopt cleaner technologies. It’s widely expected to be one of this year’s main stimulus programs, though question-marks remain — including how much the government will spend.

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German Business Outlook Hits One-Year High as Economy Heals

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German business sentiment improved to its highest level in a year — reinforcing recent signs that Europe’s largest economy is exiting two years of struggles.

An expectations gauge by the Ifo institute rose to 89.9. in April from a revised 87.7 the previous month. That exceeds the 88.9 median forecast in a Bloomberg survey. A measure of current conditions also advanced.

“Sentiment has improved at companies in Germany,” Ifo President Clemens Fuest said. “Companies were more satisfied with their current business. Their expectations also brightened. The economy is stabilizing, especially thanks to service providers.”

A stronger global economy and the prospect of looser monetary policy in the euro zone are helping drag Germany out of the malaise that set in following Russia’s attack on Ukraine. European Central Bank President Christine Lagarde said last week that the country may have “turned the corner,” while Chancellor Olaf Scholz has also expressed optimism, citing record employment and retreating inflation.

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There’s been a particular shift in the data in recent weeks, with the Bundesbank now estimating that output rose in the first quarter, having only a month ago foreseen a contraction that would have ushered in a first recession since the pandemic.

Even so, the start of the year “didn’t go great,” according to Fuest.

“What we’re seeing at the moment confirms the forecasts, which are saying that growth will be weak in Germany, but at least it won’t be negative,” he told Bloomberg Television. “So this is the stabilization we expected. It’s not a complete recovery. But at least it’s a start.”

Monthly purchasing managers’ surveys for April brought more cheer this week as Germany returned to expansion for the first time since June 2023. Weak spots remain, however — notably in industry, which is still mired in a slump that’s being offset by a surge in services activity.

“We see an improving worldwide economy,” Fuest said. “But this doesn’t seem to reach German manufacturing, which is puzzling in a way.”

Germany, which was the only Group of Seven economy to shrink last year and has been weighing on the wider region, helped private-sector output in the 20-nation euro area strengthen this month, S&P Global said.

–With assistance from Joel Rinneby, Kristian Siedenburg and Francine Lacqua.

(Updates with more comments from Fuest starting in sixth paragraph.)

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Parallel economy: How Russia is defying the West’s boycott

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When Moscow resident Zoya, 62, was planning a trip to Italy to visit her daughter last August, she saw the perfect opportunity to buy the Apple Watch she had long dreamed of owning.

Officially, Apple does not sell its products in Russia.

The California-based tech giant was one of the first companies to announce it would exit the country in response to Russian President Vladimir Putin’s full-scale invasion of Ukraine on February 24, 2022.

But the week before her trip, Zoya made a surprise discovery while browsing Yandex.Market, one of several Russian answers to Amazon, where she regularly shops.

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Not only was the Apple Watch available for sale on the website, it was cheaper than in Italy.

Zoya bought the watch without a moment’s delay.

The serial code on the watch that was delivered to her home confirmed that it was manufactured by Apple in 2022 and intended for sale in the United States.

“In the store, they explained to me that these are genuine Apple products entering Russia through parallel imports,” Zoya, who asked to be only referred to by her first name, told Al Jazeera.

“I thought it was much easier to buy online than searching for a store in an unfamiliar country.”

Nearly 1,400 companies, including many of the most internationally recognisable brands, have since February 2022 announced that they would cease or dial back their operations in Russia in protest of Moscow’s military aggression against Ukraine.

But two years after the invasion, many of these companies’ products are still widely sold in Russia, in many cases in violation of Western-led sanctions, a months-long investigation by Al Jazeera has found.

Aided by the Russian government’s legalisation of parallel imports, Russian businesses have established a network of alternative supply chains to import restricted goods through third countries.

The companies that make the products have been either unwilling or unable to clamp down on these unofficial distribution networks.

 

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