Published Monday 22nd February 2021
China, the first country hit by COVID-19, is the only major economy to have achieved growth in 2020. Their economy has almost normalised – something that cannot be said of other major economic players, including the UK.
Many are now looking towards China as they lead the world in post-COVID economic recovery. Can the UK take away any lessons from China’s growth or will different responses need to be developed?
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China’s Economic Growth
With an annual growth of 2.3% during 2020, China reported its strongest growth in two years. At the end of last year, the Chinese economy was expanding at a faster rate than before the pandemic, despite the new challenges faced by all industries.
During the fourth quarter of 2020, there was an economic increase of 6.5% – a strength that many economists suggest will persist during the first half of 2021, although expansion is expected to drop slightly after this point.
With such a successful initial recovery, many will be wondering how to emulate this growth and how it can be maintained in an active pandemic.
The Reasons For China’s Economic Recovery
How was China’s economy able to bounce back and achieve this boost? In short, the conditions surrounding China’s growth were as follows:
- An increased global demand for Chinese goods
- A rapid response from the governemt when containing the virus
- Strategic government investments for businesses
Like in most other countries, China’s domestic retail sales saw a significant under performance due to restrictions and the closure of stores. However, unlike other nations, economic growth became supported by external demand.
With Europe and the US showing increased demand for goods rather than services, China was in a prime position to provide for this growing need – allowing for an influx that wasn’t experienced by other countries.
Along with this increased global demand for Chinese goods, there are several other factors that contributed to China’s swift rebound, enabling a higher level of recovery than any other major country thus far.
The Chinese government’s rapid response when quarantining Wuhan during the first outbreak of the virus helped to limit the domestic spread from the start. Many other governments were not as quick to respond. They did not implement strict lockdowns before the virus could no longer be contained, leaving their countries more vulnerable to economic downturn during lengthier lockdowns.
The swift economic recovery and growth have also been possible because of well-placed government investments and emergency relief for businesses. China was strategic about where money was being spent, which is now beginning to pay off as the country gets back on track.
Fears Over Future Economic Dips
Despite this period of growth, China must remain cautious and expect fluctuations in the economy.
The threat of COVID-19 is still looming; although many previously at-risk areas are now out of the strictest lockdown measures, there are fears over future national outbreaks as cases are still evident.
There are also fears over future dips in the economy as other countries stop relying as heavily on Chinese goods. With large scale vaccine rollouts on the horizon, other countries and businesses will be able to start returning to normal.
The State of the UK Economy
How does the UK’s economy compare to what we’ve seen in China?
By the end of 2020, the UK’s economy had shrunk by 9.9%. Although the UK is by no means in China’s position of economic recovery, the nation was able to avoid a double-dip recession, with many hoping to see growth in the coming months with high hopes for the vaccine.
When restrictions were eased after the first wave of the crisis, there was an initial period of recovery, but with subsequent lockdowns, many sectors faced additional setbacks – GDP fluctuated as Britain came in and out of lockdowns with no real sense of steady growth.
However, economic damage was less extreme in the November lockdown when compared to the summer period as many businesses learnt to adapt to the challenges.
Can the UK Learn from China?
China’s impressive growth is largely due to a combination of factors that cannot necessarily be replicated at this stage to ensure success in the UK or anywhere else.
Despite the particular circumstances that led to China’s post-COVID recovery, there are still some things we can learn from the country’s approach.
The UK can look at China’s strategic implementation of government investments and relief funds – many other governments have relied on blanket stimulus funds whereas China has been careful about where emergency funds go, helping support real growth.
The UK can also learn from China’s strict focus on controlling the spread of the virus. Being unrelentingly proactive in regard to limiting the spread of the virus is key when hoping to get back to a point of economic growth, which has been shown with China’s approach.
The UK has also seen the benefits of tighter control over the virus with a boost in output when ‘Test and Trace’ was implemented, allowing businesses to function at some capacity even if it is not a return to normal.
While China was able to start recovery without a nationwide vaccine rollout, many argue that the UK’s growth relies on vaccines that will allow a bounce back in economic activity for sectors like hospitality and leisure which have been hit the hardest.
Although the British and Chinese recovery processes will look very different, there are still some things the UK can take away from China – namely, the continued careful management of the virus and more strategic economic spending.
If your business continues to struggle under the economic challenges of the pandemic, a proactive approach to expense management and cost reduction could help you build back solid foundations to pave the way for long-term growth. For more information about how Expense Reduction Analysts can support you, get in touch today.