[thread] What is #China going to do with its economy, now that it is slowly limping back from the #Coronavirus onslaught? Experts say China's Q1 GDP growth rate will at best be just positive, if not negative. So, China appears planning for a turnaround in Q2 growth rates. 1/n
There are many factors in China's favour, as it prepares for a revival. First, it has not just flattened the curve, but also not reported any new local transmissions for the first time. It had also confined the outbreak to Hubei, leaving other areas largely unaffected. 2/n
Secondly, it has learnt lessons from the economic impact of the SARS virus in 2003, when GDP growth rate, industrial output, retails sales and exports fell. The #Coronavirus episode is worse, but the fact is that China has faced it before. See cnb.cx/2J2sqX0 3/n
Thirdly, though its trade partners like South Korea, EU and USA are in trouble, and may cut imports from China, China's domestic market is large and strong. This will hold China in good stead, as the economy tries to bounce back in Q2. 4/n
Fourthly, China has already developed a strong digital economy. This, experts say, has helped China cut losses during the #Coronavirus episode and will help revive China back into a high growth path. 5/n
Finally, China's ability to quickly hit the ground with portable testing kits and vaccine tests during the #Coronavirus episode may turn out to be advantages, because it may emerge as the new world leader in some of these emerging cutting-edge sectors. 6/n
But China also has some post-pandemic disadvantages. First, its exports are not likely to grow fast anytime soon, as its major trading partners are still badly down. This might delay recovery in some sectors. 7/n
Secondly, the crisis has led to a global perception-risk for Chinese goods. This risks a movement of value chains away from China. China is tightening its bio-security regulations, which might lead to a loss of its cost-advantage in many goods. See bit.ly/2U4spYV 8/n
Yet, China's announcement of a comprehensive economic revival package is a model for many other affected countries. The focus is to increase infrastructure investment, backed by $394 billion worth local government special bonds. The lead role is for fiscal policy. 9/n
Reuters reports that China aims to speed up the construction of planned key infrastructure projects as well as launch some new projects for public health, emergency materials supply, 5G networks and data centers in 2020. See reut.rs/2Qx1B1g 10/n
As a result, China's national budget deficit ratio could rise to 3.5% in 2020, up from 2.8% last year. There are also monetary policy measures: credit/tax relief to firms, esp small businesses and cuts in banks’ reserve requirement ratios and interest rates. 11/n
The Economist reports that Foshan, a city in Guangdong province, has launched a subsidy programme for people buying cars. Other cities have started giving out coupons that can be spent in local shops and restaurants. Nanjing gave out e-vouchers worth $45m this month. 12/n
To help cut rent & labour costs of firms, Chinese companies are exempted from making social-security contributions for up to 5 months. The electricity price for most companies has been cut by 5%. There are also short-term value-added-tax cuts. See econ.st/2UyST47 13/n
Some earlier measures are already finding success. "Revenge-spending" has started in China, says Fortune (bit.ly/38ZBBlz). Supply chain congestion is now at 73% of the 2019 levels, up from 62% at the worst part of the epidemic (bit.ly/2U4BZv9). 14/n
Coal consumption in China has risen from 43% of 2019 levels to 75% of 2019 levels now. Real estate transactions have risen from 1% of 2019 levels to 47% of 2019 levels. Apple has reopened 42 stores in China. Chinese malls are seeing rising foot traffic. 15/n
Hermes had 11 stores in China closed, but has reopened all but two. About 85% of the 3600 Chinese stores of Chow Tai Fook Jewellery Group Ltd., the world’s biggest jeweler by sales, have reopened. These numbers show that consumption is picking up fast. 16/n
Globally too, fiscal stimulus is the preference for countries. The Economist says Germany has pledged unlimited cash to its businesses. In Bavaria, small and medium-sized companies with < 250 workers will obtain an immediate cash injection of between €5,000 and €30,000. 17/n
After a 1st fiscal package in Feb, Japan has declared a 2nd one of size $4bn. It is helping small firms (whose monthly sales fall at least 15% below normal) by asking state-owned lenders to give up to ¥1.6trn of emergency loans without interest and collateral. 18/n
The Economist estimates the size of USA's yet-unannounced fiscal package to be > $1trn (5% of GDP). The total extra fiscal stimulus announced by all countries till now is already 2% of global GDP, which is more than what was dished out during the 2007-08 financial crisis. 19/n
Fiscal policies are also trying to help people in distress. More than 25 countries are now using cash transfers as part of their economic response to #Coronavirus. Brazil is giving its informal workers 200 reais ($38) each; pensioners will get their year-end benefits early. 20/n
Australia now has a one-time cash payment of A$750 ($434) to pensioners, veterans and people on low incomes. Germany has relaxed the criteria for “short-time work”, under which the govt pays 60-67% of the forgone wages of workers whose hours are reduced by struggling firms. 21/n
In Denmark, if firms risk cutting 30% or more of their workforce, the govt will pay 75% of the wages of workers, who would otherwise be laid off, until June. Norway has raised unemployment benefits and guaranteed full salary to laid-off workers for the first 20 days. 22/n
Norwegian workers who lose more than a fortnight's work will be paid 80% of their previous average income by the govt. In Sweden, half of the income of laid-off workers will be paid by the govt, and employers will be asked to pay the rest. 23/n
How much will global fiscal deficits rise due to these steps? The Economist estimates that combined borrowings of 35 rich countries will rise from $1.5trn in 2019 to $4trn this year. No one appears unduly, and rightly so, worried about this extent of rise in borrowing. 24/n
In contrast, today's TV address of Indian PM Modi didn't see him promise a single rupee. Instead, he announced a "janata curfew" on 22 Mar, where everyone will come on their balconies and either clap, ring bells or sound sirens for 5 minutes! That's India's revival package! 25/n
The end. 26/26
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