People entering China still have to submit to a strict quarantine: every newcomer, regardless of nationality, is put in a hotel room for 14 days and is not allowed to leave the room. Employees wearing full-body protective suits come twice a day to take the temperature. Three times someone puts food packed in plastic in front of the door. After 14 days and a negative corona test, you will be released into Chinese freedom.
Once outside you can hardly believe your eyes. All restaurants, bars, cinemas and clubs in Shanghai are open. On the Wulumuqi Lu, a lively street in the French Concession, passers-by crowd past each other at a distance of centimeters as ever. Hardly any of the 23 million residents of Shanghai adheres to something like “social distancing”. Masks? Can be worn, it is not required anywhere. And the health code, which is supposed to prove that you have not been in any risk area, is hardly required anywhere.
Anyone walking the streets of Shanghai in late October might come to the conclusion that there was no such thing as a pandemic.
In this respect, the latest Chinese economic data seem quite credible. While the rest of the world is sinking into recession, China is growing. It was 4.9 percent in the third quarter, from July to September. China has thus caught up with the entire Corona slump in the first quarter: The world’s second largest economy has grown by 0.7 percent since the beginning of the year.
China GDP Growth Rate (Annually)
If you believe the Chinese figures, successfully fighting the pandemic is the cause of the upswing. In the supposed country of origin of Covid19, barely more than 20 people have been infected with the virus every day for months. With 1.3 billion people this is hardly conceivable, and especially in the first week of October, one of two traditional holiday weeks a year, around 700 million Chinese were partly crowded.
Skepticism is appropriate
In addition, there has hardly been a number in the past few decades that the Communist Party has not whispered about – regardless of whether it is growth figures, air pollution values or HIV infections. There is no free press that could check the information. So there is good reason to be skeptical.
On the other hand, nowhere in the world were the curfews as strict as in the first few weeks in Wuhan City. And that the Chinese are in the mood to buy is also obvious.
Beijing has succeeded in converting its economic model over the past ten years. In 2010, the majority of economic output came from exports; today it is only just under 17 percent. This also means that China has become more independent of the fluctuations in the world markets. If economic output falls in the West, this only has a limited impact on GDP growth in the People’s Republic.
It has been the stated goal of the Beijing leadership in recent years to become less dependent on infrastructure, investments and exports, and instead to strengthen domestic consumption. We succeeded – something that German carmakers really appreciate.
China’s leadership depends on growth
Ultimately, however, Beijing is pushing something for which the US has been criticized: the decoupling of the national economies. President Xi Jinping is now talking more and more about the “dual circulation”, the “two cycles”. What is meant is nothing more than that the Chinese economy should be characterized on the one hand by strong domestic consumption and that it remains integrated into global supply chains in a second cycle. You want to become more independent and export at the same time. The corona shock and the subsequent recovery have intensified this again.
But even that couldn’t be done without help from above. The government helped with tax breaks, consumer vouchers and cheap loans to generate growth. The Beijing management even took care of the overheated real estate sector: Investment there grew by twelve percent in September compared to the same month last year.
But the strength of the Chinese model is also its greatest weakness. Like no other government in the world, the communist rulers are dependent on growth. A flourishing economy is the basic promise of the CP to the people and thus their legitimation claim. If China slips into recession, it will also be tight for the cadres. In the first few months of 2020, many were under great stress – it was the first contraction in the economy since 1992, when figures were first published. Right now, when the conflict with the USA is coming to a head, the leadership wants to present itself as a haven of stability to its own people.
Whether China can escape a global recession in the long term does not seem credible. It is not unlikely that the numbers will be tweaked again – it would not be the first time.