Before I get into the main topic I would like to share and draw your attention to something which is need of the hour or going to be the only survival path. Lockdown has eradicated the GDP growth drivers of many economies. We are just at the beginning of the new decade and we have already used our ammunition towards stimulus packages. This leads to the path of collaborative business/trade and investment revolution to grow by leaps and bound.
PMI numbers have started coming out across the globe and all numbers are record-breaking poor numbers. The lockdown impact and its depth will now be measured in the economic data which will be released in the coming week. To come out of the depth we need synergy between developed and emerging economies to come together to create the ecosystem of global GDP growth.
Being an economist I won’t be surprised if there is another round of stimulus as the depth of layoff and closing down of business will be prolonged activity. The layoff will not only be of lockdown impacts but more of the business visibility. If Chinese products are more cheap compared to domestic supplies (as china is planning to cut down prices through its own stimulus packages) then why should one go for a high-cost product which will impact margins.
The irony within this segment is that China will bounce back from the slowdown activity at a much higher speed. China has shareholding of 15% of the World GDP in terms of its supply chain. This number alone is sufficient enough to get back its lost ground. China: share of global gross domestic product (GDP) adjusted for purchasing-power-parity (PPP) from 2012 to 2020 have around the range of 15% to 19%. You cannot dream to ignore these numbers. These are the GDP growth drivers for Chinese GDP to 6%.
Chinese GDP growth will be back to 6% to 6.3% in 3rd Quarter of Calendar year 2020. Don’t forget that before the lockdown the supply chain was disrupted as china got infected. Then the rest of the world got impacted. The whole supply network from china was cut down. Hence currently the requirement of many goods and supplies are short at the manufacturer end.
The interesting part will be watching out how the Trade war will hold its impact post-COVID-19. Yes, if the US is still going to keep a tight leash on the trade war then also being an economist I don’t find any reason why china will not achieve a GDP growth of 6%.
Now once the lockdown is removed in the developed economies there will be a significant jump of demand goods and supplies since the pocket are empty for a long time. China is now busy in ramping up its productivity which it will be done very soon and hence before the world economy gets out of lockdown it will be ready with its massive supply chain.
Now currently china is busy getting its manpower back into the system as they are scared of the coronavirus. The fear factor has now taken over the manpower to get back to the street and hence gradual progress will get them all back. China will get significant time to get back with the full strength of supplies as developed economies and the rest of the world lockdown phase will give that tie to China.
Only less than one condition where china might face more hurdles if the influence of coronavirus gets back into its own country, then its GDP growth will not happen as projected above. The lockdown has created a tremendous opportunity for many countries to increase their supply and renegotiate new trade pacts which will help these economies to grow.
Collaborative trade activities will be the only path to get back the World GDP growth. Business from henceforth will need collaborative strategies to support the growth of every individual country. The monopolistic gameplay will no longer be helping the global economies to face another blow in this decade. Its, time for developing the collaborative ecosystem of GDP growth. If we get back to history we all know that before and post-world war II many countries came together to reconstruct the global economy. Similarly, only the stimulus will not help-we need trade and business to be a joint effort and more synced with respective GDP growth.
Well coming back to China it will grow like anything in the next few quarters unless it again gets under COVID-19 and past trade war issues.