China and its strong economic recovery from the coronavirus pandemic have not gone unnoticed. Fourth‑quarter gross domestic product (GDP) growth came in at 6.5% year over year, pushing the annual average growth to 2.3% for 2020. China should be the only major economy to record economic growth for 2020. But what lies ahead for the second‑largest economy in the world, and what are the factors that we should watch for as it continues to progress?
Pandemic Response Has Allowed a Much Quicker Recovery
China's V‑shaped recovery has been primarily attributed to a strong public health response. China successfully implemented what the IMF called "effective containment measures" to aggressively curb the spread of COVID-19, the disease caused by the coronavirus. The return to a more normal environment has been driven by three main factors—swift lockdowns, testing, and masks.
China adopted stringent measures very quickly to deal with the pandemic, with previous experience of pandemics (e.g., SARS) and the political structure allowing for quicker control of the disease. This has allowed the economy to get back on track much quicker, with manufacturing the first to bounce back and followed by a recovery in the services sector. Vehicle sales data provide one indicator of the nature of the V‑shaped recovery.
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