Playtime’s Over

China’s economic recovery is well underway, and it looks like two can’t play at that game: it’s one-upping the US at every turn.

 

🕰 Recap

  • In October, data showed the Chinese economy had regained the ground it lost from the pandemic-driven lockdowns.
  • In November, China’s exports had their biggest monthly increase since early 2018.
  • Earlier this month, the Chinese stock market hit its highest level in 13 years.
  • And on Monday, better-than-expected economic growth data showed China is now growing faster than it was before coronavirus arrived.

 

✍️ Connecting The Dots

China was the first nation to be struck down with coronavirus, but it was also the first to nip it in the bud. That’s why, by October, the country’s economy had regained all the ground it had lost when its lockdown brought the country to a standstill. It’s also why – according to better-than-expected data earlier this week – it was the only major economy to grow last year. In fact, it’s now also officially growing faster than it was before the pandemic.

That economic boom has predominantly been fueled by global pandemic-driven demand for its medical supplies and work-from-home tech. And therein lies another reason the Chinese economy is powering ahead of the West. See, China’s industrial sector – which manufactures those in-demand goods – makes up around 40% of its economy, compared to America and the European Union’s 20%. Their economies, meanwhile, depend more heavily on the services sector, which includes the restaurants and retailers that have been hit particularly hard by the pandemic.

China didn’t just outdo the West when it came to economic growth either: its stock market also rose faster than those in the US and Europe last year. In fact, demand for the country’s stocks – from Chinese and foreign investors alike – has been so high that they hit their highest level in 13 years earlier this month.

 

🥡 Takeaways

1. Things can only (probably?) get better.

There are a few different opinions on what a vaccine-driven global economic recovery has in store for China. Some economists reckon the country’s economy will get another lift when vaccines become widely available, as US and European recoveries drive even more demand for its products. Others argue it might have the opposite effect: anyone with a vaccination might, after all, go straight back to spending their money on restaurants, concerts, and… well, real life. Still, the naysayers seem to be in the minority: economists in aggregate expect China’s economy to expand at its fastest pace in a decade in 2021.

2. There’s more to China than rapid growth.

Rapid economic expansion aside, there has been one cloud behind China’s silver lining: its fraught relationship with the US. But one country’s obstacle is another man’s opportunity: one investment manager suggests bumping up investments in China specifically because of the US-China trade war. The firm reckons the two countries’ economies might be knocked even more out of sync, which would leave Chinese stocks less dependent on the West’s performance. And if things go wrong in the developed economies, that diversification might just save your portfolio.

 

🎯 Also On Our Radar

The Democratic clean sweep in the US election has got investors excited that the country could be headed for the country’s most progressive climate strategy in history – sending investments in the renewables industry higher. And those investors should be equally pleased to find out that the new president means business: only hours after being sworn in, he signed plans to rejoin the Paris climate accord and rescinded a host of his predecessor’s less climate-friendly policies.

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