China taps old growth model to boost recovery, as US and European economies flounder
- China’s recovery has been based on its old model of construction, investment and low-end exports, but analysts say this approach does not have a long shelf life
- US and Europe lag China in rebounding from the coronavirus pandemic, with experts pointing to Beijing’s unencumbered ability to pull levers of the economy
China’s recovery from the coronavirus pandemic continued in July, but analysts have cautioned that the nature of the rebound represents a step back in time, with the economy once more reliant on heavy industry, infrastructure projects, debt, investment and low-end exports.
The rebound was powered by a revival in export orders, as well as building projects, with other indicators also suggesting China has returned to its old playbook of building and exporting its way out of the crisis. State funded investment in China is at a 10-year high.
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The Eurozone economy – roughly 85 per cent of total European Union gross domestic product (GDP) – shrank by 15 per cent in the second quarter compared to a year earlier, new data on Friday showed, while US GDP contracted by a record annualised rate of 32.9 per cent over the same period, essentially wiping out five years of American economic growth, even as cases of coronavirus continue to pile up.