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China’s Economy Bounces back from COVID-19- October 2020

With the coronavirus pandemic mostly under control, the Chinese economy has soared back from its recessionary levels. The world’s 2nd largest economy saw growth of 4.9% between July and September, relative to the same quarter last year. While growth is still lower than the 5.2% expected by economist, China is leading the charge for a global recovery.

For the first three months of the year, China’s economy decreased by 6.8% because of strict quarantine orders and nationwide shutdowns of factories and manufacturing plants. As workers return to workforce, consumption will increase - leading to a higher level of aggregate demand and economic activity. Domestic tourists and travellers have also aided in the recovery by spending their money at home as global restrictions have prevented overseas travel. This marks an acceleration of China’s transition towards a consumption-based economy, where growth has increasingly been driven internally through consumption rather than through trade.


The implications for the Australian economy remain uncertain. While China’s economic recovery could indicate a resumption in demand for Australian mining exports, there is sufficient supply side capacity to minimise the need for new capital-intensive investment projects. Furthermore, traditional service exports such as tourism and education are unlikely to recover due to Australia’s border closures. Perhaps, the main channel through which China’s recovery will impact Australia is through increased purchases of Australian agricultural exports such as beef and wine.




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