China's economic recovery is two-pronged, according to the CEO of research firm China Beige Book, Leland Miller.
While China's economic recovery seemed rosy because the country was able to manage a coronavirus-induced slowdown, there is no improvement on a year-on-year basis, Miller said.
He also pointed out that the recovery is not evenly happening throughout the economy.
“The recovery itself is actually two-pronged, and you see the larger cities, you see the coastal regions doing much, much better than the rest of the country,” he said during an interview on CNBC.
“So, there’s really two recoveries going on — Beijing wants to advertise the Beijing, Shanghai, Guangdong type of recovery, but that’s not most of China,” he stressed.
Miller revealed that businesses are not borrowing as much as they should.
“If you look at what’s happening in the credit markets too, a lot of these firms, services in particular, but also retail, others, are not borrowing as much as you would think that they would,” he said.
Meanwhile, he noted that small and medium-sized businesses are borrowing a lot less than they were in the second quarter.
“That’s not what should happen. When you’re coming out of a coronavirus stoppage or slowdown, we should be seeing a lot more borrowing. Since we’re not, you got to question what firms are seeing that’s making them hesitate,” Miller said.
China's economy
In September, British economist Jim O’Neill said that China’s recovery from the coronavirus crisis is accelerating and is positioned to drive global GDP.
The former chief economist at Goldman Sachs explained that the recent Chinese consumer spending data indicated the speed of China’s economic recovery.
In August, China saw a 0.5% increase in retail sales from a year ago, the first positive growth for 2020 so far.
“I suspect Chinese GDP growth could actually end 2020 as net positive still,” O’Neill said during an interview with CNBC. “By end 2021, Chinese GDP growth will have possibly even made up for, not only the losses but the loss in the trend also.”
Other analysts, including the Asian Development Bank, also think China’s economy will turn out better than the rest of the world in 2020.
China's exports and imports saw record highs in September, according to a spokesperson for the national customs agency interviewed by Reuters.
The agency reported a 10.2% increase in China’s exports in the third quarter from a year ago to 5 trillion yuan ($742.9 billion).
Aside from China exports, imports increased from 4.3% to 3.88 trillion yuan during that time, data shows.
For September, in U.S. dollar terms, China’s exports increased by 9.9% from a year ago. This is around the expectations of 10% by analysts, according to a Reuters poll.
Global impact of China's recovery
David Chao, global market strategist for Asia Pacific at the firm, said during an interview on CNBC’s “Street Signs Asia" that economies in Asia will benefit from China’s economic recovery.
“China’s economic recovery will lift surrounding Asian economies to a certain extent,” he said.
The main point is about “whether the Chinese consumer can quickly return back to normalized activity,” Chao said. “I think that the Chinese will have much more impact … on boosting other Asian economies.”
However, the extent of rebound this time may not be on par with 2010, when China “grabbed other Asian economies by the boot straps.”
