Thanks to the sheer weight of its economic prowess, China was able to begin its economic recovery process fairly early compared to other nations. This recovery trend has continued into the second half of 2020, albeit unevenly.
Said recovery is being helped along by a combination of modestly loose monetary policy, financial industry growth, and improved customer demand in wealthier, high-tier cities, said Hao Hong, head of research and managing director at Hong Kong-headquartered BOCOM International, part of China’s Bank of Communications.
Experience gained from the last economic downturn during the 2008 global financial crisis has had a hand in helping to guide monetary policy in 2020. Large stimulus spending at that time led to “tremendous excess liquidity that we still trying to digest to this day,” Hong said.
Unfortunately, recovery is slower in lower-tier cities where SMEs play a larger role. Hong states that the SMEs of China are facing a situation that is no different from the rest of the world; with smaller businesses struggling to secure bank credits despite looser restrictions and government assistance. SMEs are particularly vital to China’s economy and employment, with over 80 percent of the nation’s workforce being employed by smaller businesses.
That uneven recovery landscape, along with question marks about the international outlook, forms the backdrop for the new “double circulation” policy launched in the second half. Said policy seeks to focus on improving domestic consumption. This makes sense due to the increasing pressure on the global supply chain as well as the continuing economic rivalry between China and the US.
With China’s overall outlook still promising, Hong doesn’t expect multinationals to pull out entirely. He is confident that China’s domestic market will remain a strong pull for both local and international companies.