Most Main Economies Are Shrinking. Not China’s.

SHANGHAI – With most nations around the world grappling with new lockdowns and layoffs in the face of the growing pandemic, only one major economy has recovered after getting most of the coronavirus under control: China.

The Chinese economy grew 2.3 percent last year, the country’s National Bureau of Statistics said in Beijing on Monday. In contrast, the United States, Japan, and many nations in Europe are expected to have suffered a sharp decline in economic output.

China’s strength seemed unlikely a year ago when the virus hit the central Chinese city of Wuhan. When the travel and business situation almost came to a standstill, the economy contracted 6.8 percent from January to March compared to 2019, the first decline in half a century.

Since then, the economy has improved steadily and closed the year with a growth of 6.5 percent in the last three months compared to the same period last year. While the recovery remains uneven, factories across China are in full swing to fulfill overseas orders and cranes are constantly busy on construction sites – a boom in exports and infrastructure that should fuel the economy for the coming year.

At booths in Wuhan Taiyuan Textile Market in Hubei Province, apparel factory managers have ordered large samples of fabric to meet domestic and international apparel orders. At Xuzhou Construction Machinery Group in Jiangsu Province, facilities are in operation day and night to keep up with the demand for new earthmoving and pile driving equipment. Huahong Holding Group, a large exporter of framed prints and oil paintings in Zhejiang Province, has doubled profits.

“This is the only major economy that has quickly recovered from the pandemic and is able to operate normally,” said Zhou Linlin, a Shanghai financier on Huahong’s board of directors. “So all of these orders are coming to China from all over the world.”

However, the general resilience of the Chinese economy hides weaknesses.

There are many jobs for blue-collar workers, but they were rare for young college graduates with little experience. Service companies such as hotels and restaurants did well in large coastal cities such as Beijing and Shanghai late last year, but never fully recovered in inland provinces. Consumer electronics and personal protective equipment manufacturers have benefited from the pandemic, but exporters to poor disease-ravaged countries have not.

Zhang Shaobo, the owner of a Halloween mask factory in Yiwu, received news in March last year that one of his most consistent export customers in India had contracted the coronavirus. In May the man was dead. New customers from Mr. Zhang’s main markets in India and South America also stopped coming to China to view his latest products.

He fired all but four of his 20 factory workers and began making preparations to close his business in Yiwu’s wholesale market. Since the business is so weak, he said, “I’m not going to keep renting it.”

China’s top leader Xi Jinping paid tribute to the economic challenges in a speech published by Communist Party magazine Qiushi on Friday.

“There are profound adjustments in the international economy, technology, culture, security and politics, and the world is in a period of turbulent change,” Xi said in the speech delivered in August. “In the coming period, we will face an external environment with increasing headwinds and countercurrents and we must prepare to respond to a range of new risks and challenges.”

These challenges could get worse in the coming weeks. After notable success in taming the coronavirus, China has suffered a number of minor outbreaks recently. The government was quick to mobilize by building hospitals, running mass tests and banning at least 28 million people.

Updated

Jan. 17, 2021, 10:48 p.m. ET

Authorities are starting to reintroduce a variety of health checks that are deterring consumers from spending. Not everyone was doing well before the recent outbreaks. Consumer confidence never fully recovered in the past year. Chinese families have shown themselves to be particularly cautious when it comes to large expenses such as renovation projects or new furniture.

Lin Jinting, a worker in Wuhan, can typically earn nearly $ 100 a day bringing heavy loads home for buyers. Now many people are postponing major purchases and work is scarce.

“I came here this morning at 8:00 am and I didn’t get any orders today,” he said one afternoon.

Keeping the virus at bay has been critical to China’s economic success over the past year. As the pandemic devastates other nations, Beijing’s aggressive top-down approach prevented the virus from spreading rapidly across the country.

In China, nearly 100,000 cases and fewer than 5,000 deaths have been reported, mostly in Wuhan. Around 150 cases have been reported daily in the current outbreaks. In the United States, there were over 220,000 cases and 3,300 deaths a day.

Mary Wu, a 26-year-old saleswoman in Jiande, southeast China, was only allowed to leave her home once every three days during a lockdown last spring. The local schools closed for their children between the ages of 4 and 9. But life quickly returned to normal, schools reopened, and Ms. Wu and her family started eating out again.

Ms. Wu even sent her older child to additional classes to make sure they caught up any ground they lost. She no longer worries about the virus.

“We all wear masks,” she said.

With the virus largely under control, Beijing has relied on its old game book to help boost the economy.

When Wuhan was still under lockdown, the authorities moved to restart production in other areas. They provided long-distance buses to take the workers back to the factories from their home villages after the Chinese New Year. State banks provided special loans to factories, while many government agencies partially reimbursed corporate taxes paid before the pandemic.

China, already the world’s largest manufacturer, expanded its lead this year. Despite the trade war and tariffs, American and European companies turned to parts and goods of China when factories elsewhere struggled to meet demand. Factories in China turned to nearby suppliers to replace imports as transoceanic utilities became less reliable.

The “Made in China” label was particularly popular as people stuck in their homes were being renovated and refurbished. At the Xingxing refrigerated factory in Taizhou, managers cannot hire staff fast enough to keep up with the strong demand for freezers for people looking to store more food during a pandemic.

The consumer electronics sector in China is particularly strong right now, for both white-collar and blue-collar workers. When American managers could no longer travel to China last spring to oversee technology projects, the demand for electronics project managers who were already in China soared.

“Companies found everyone they could find,” said Anna-Katrina Shedletsky, general manager of Instrumental, a remote quality monitoring system used by global brands to track and manage electronics manufacturing.

Beijing also increased its infrastructure spending. Every major city in China was already connected by high-speed rail lines enough to span the continental United States seven times. However, smaller cities were quickly expanded to include new routes in the past year. New highways crossed remote western provinces. Construction companies switched on floodlights at many locations so that work could continue around the clock.

Exports and infrastructure were key drivers of last year’s growth. China’s exports rose 18.1 percent in December and 21.1 percent in November compared with the same month last year. Investments in property, plant and equipment, from high-speed lines to new residential buildings, rose 2.9 percent last year.

Both are expected to power the economy in 2021.

The Chinese Academy of Social Sciences predicted last week that the country’s economy will grow by 7.8 percent this year. If it did, it would be China’s strongest achievement in nine years.

Liu Yi and Coral Yang contributed to the research.

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