Coronavirus recovery: rapid response leaves China better placed for 2021 than US, Europe

Name: Beijing in emergency mode after five new coronavirus cases found in Chinese capital
Uploaded: 2020-12-29T15:15:30.000Z
Duration: 1 min 25 s
Description: Beijing in emergency mode after five new coronavirus cases found in Chinese capital

Investors have taken note of China’s recovery as overseas capital has moved into yuan-denominated assets and helped fuel a rise in the value of the renminbi

China’s more stable economic footing will give it more monetary policy options than Europe or the US and make it more attractive to investors

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Neal Kimberley

Published: 11:15pm, 29 Dec 2020Updated: 12:41am, 30 Dec 2020

A new year beckons and markets expect effective vaccines against Covid-19 to underpin global economic recovery, but it is the positive prospects for the Chinese economy that could garner the most investor interest.

While China was the first economy to suffer the depredations of Covid-19, it is also the most successful among major economies in suppressing the virus and crafting a post-pandemic economic recovery. Investors have taken note, and the second half of 2020 saw overseas capital move into yuan-denominated assets and help fuel a rise in the value of the renminbi.

One think tank, the Centre for Economics and Business Research, now sees China overtaking the United States to become the world’s largest economy in 2028, five years earlier than it had previously envisaged.

In the coming months, the scale of China’s post-pandemic economic recovery compared to that of the euro zone and the United States will surely require a different monetary policy response from the People’s Bank of China than should be expected from the European Central Bank and the Federal Reserve.

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Beijing in emergency mode after five new coronavirus cases found in Chinese capital

Overseas investors should continue to be attracted to the comparatively higher yields offered by yuan-denominated assets and the prospect that broad demand for such assets will continue to underpin the value of the yuan on the foreign exchanges.