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Here’s exactly why China is so crucial to global recovery

Jessica Yun
·4-min read
SHIYAN, CHINA - DECEMBER 10, 2020 - A giant five-starred red flag moves past an educational activity attended by more than 1,300 teachers and students in Shiyan city, Hubei province, China, On December 10, 2020.- PHOTOGRAPH BY Costfoto / Barcroft Studios / Future Publishing (Photo credit should read Costfoto/Barcroft Media via Getty Images)
An educational activity attended by more than 1,300 teachers and students in Shiyan city, Hubei province, China, On December 10, 2020. (Photo credit: Costfoto/Barcroft Media via Getty Images)

The Asia-Pacific region is leading the world in global economic recovery, rescued by the “lifeline” of trading links with China, a new report has found.

Exports to China, and its supply chain links to certain Asian countries, have helped the entire region rebound from the pandemic’s economic devastation, according to a report from Moody’s Analytics experts Steven Cochrane and Sonia Zhu.

“While the rest of Asia-Pacific still struggles to regain lost output, improving export trends are now driving recovery across nearly the entire region,” the analysts wrote.

China’s focus on its domestic growth has played a “leading role” in lifting Asia-Pacific’s broader economic recovery, they added.

“Following the financial crisis, China doubled down on the investments it had been making for many years in infrastructure, housing, and to a large degree in large state-owned enterprises, fueling its own economic growth and creating strong demand for commodities and goods from its many APAC trading partners.”

The Asian superpower’s post-COVID-19 stimulus was focused on infrastructure and housing in 2020, but this is now shifting to targeting its export-oriented manufacturing industries along with its suppliers and ports.

“This focus on getting the production side of the economy back on track effectively allowed manufacturing to spark Chinaʼs recovery beginning in the second quarter of last year, and to lift surrounding Asian economies in the second half of 2020.”

Vietnam, Malaysia, Taiwan and Indonesia in particular have been big winners from China’s growing trade demand.

(Source: Moody's)
(Source: Moody's)

These countries’ exports to China were so large that they have joined China in becoming the only countries in Asia to record GDP growth greater than its pre-recession peak.

Winners from trading with China

Those four Asian nations – Vietnam, Malaysia, Taiwan, Indonesia – have seen their percentage of exports to China grow by double digits in 2020, while Hong Kong, Japan, Thailand and Singapore have also posted a higher percentage of export growth.

However, China’s trade tariffs on Australia has meant Australia has been the only country in the region that didn’t increase its total percentage share of exports to China. Nonetheless, Australia’s overall export volumes to China hit a record high in 2020.

“Exports to China were a critical lifeline to the [Asia-Pacific] region,” the analysts wrote.

“All would have struggled further had they not had at least some link to China through industrial supply chains.

“Thus, China once again played a strong role in the region as it buoyed the exports of APAC countries, similar to the period following the financial crisis.”

China’s ‘rise’ on world stage

A Chinese flag hangs between American flags in Chinatown on February 17, 2021 in New York City. - No annual parade or large family gatherings greeted the Lunar New Year last week. Just relief at the passing of the Year of Rat and hope that the Year of the Ox will bring a turnaround in fortunes. (Photo by Angela Weiss / AFP) (Photo by ANGELA WEISS/AFP via Getty Images)
A Chinese flag hangs between American flags in Chinatown, New York City. (Photo by ANGELA WEISS/AFP via Getty Images)

China’s economic rise and position on the international stage has been a subject of focus for analysts, policy-makers and business leaders alike. The nation has become the primary trading and development partner for several emerging nations across the world beyond Asia, including Africa and Latin America, according to WPR.

But it’s also creating tensions in the world, as China flexes its economic, and military muscles.

“China’s ‘quiet rise’ has given way to more vocal expressions of great power aspirations and a more assertive international posture, particularly with regard to China’s territorial disputes in the South China Sea,” WPR wrote in an article.

Economically, China has emerged stronger than the US, with IMF forecasts indicating that China's GDP will grow from two-thirds to three-quarters the size of the US’ by the end of 2021.

At the beginning of the year, China was one of 15 countries that signed the world’s largest trade agreement, which establishes common rules on digital trade and intellectual property for all signatories involved.

The agreement is consistent with China’s eagerness to position itself as the world’s new protector of the global trading system in light of the US’ perceived smaller dominance on the global stage, experts have said.

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