COVID-era exports fuel China’s economic recovery. What happens when the pandemic ends?

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The coronavirus pandemic shook the global economy in 2020, but China is a big exception. The first country to experience a COVID-19 outbreak, China has also become the first country to reopen, giving the Chinese economy a head start on recovery.

Global gross domestic product will decline 3.5% this year. US GDP is expected to shrink by 3.5%, while that of Europe will reach 7.2%, according to at Morgan Stanley. China, meanwhile, is expected to record positive GDP growth for 2020 – 2.3% for the year, according to Morgan Stanley – making it an outlier among the major economies.

“China has done remarkably well,” Wei Sun Christianson, Managing Director of Morgan stanley China and co-managing director of Morgan Stanley Asia Pacific, told the Fortune The most powerful women in China Mountain peak Thursday in Shanghai.

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In the second quarter of the year, when most countries were still in the midst of quarantines and the first big waves of viruses, Chinese factories were resuming production and its cities were emerging from lockdown, giving the economy a boost. essential. After recording a 6.8% GDP contraction in the first quarter year-on-year, the Chinese economy turned around sharply and returned to 3.2% growth in the second trimester. In the third quarter, China’s GDP surged 4.9%.

Demand for pandemic-related products fueled exports responsible for much of China’s economic recovery this year. Exports of medical devices soared 46% in the first six months of 2020, exports of textiles – including face masks – soared 32%, and exports of laptops rose 9.1% in the last six months. during the same period, reflecting a global shift to work from home and distance education.

Morgan stanley waits China’s GDP growth will reach 9% next year and stabilize at 5.4% in 2022, but those years are likely to see a drop in demand during a pandemic, which means that the growth will have to come from elsewhere.

After the pandemic, a trend that Morgan Stanley is picking up “Urbanization 2.0”“The proliferation of regional clusters of ‘supercity’ cities, such as the Great Bay region of southern China, and their widespread use of smart city technology – will be an important economic driver,” Christianson said.

This phase of urbanization, Christianson said, will create “bigger, faster, more liveable cities, and people are going to consume more, so it will impact consumption in the end.

A growing influx of foreign direct investment will also boost China’s post-pandemic economy, Christianson said. IDE sunk in early 2020 due to the coronavirus, but FDI levels are rebounding in line with the country’s broader economic recovery.

China is relaxing its financial market regulations for foreign investors. This week, Goldman Sachs said he was trying to acquire 100% ownership of its joint venture in China, which would make it the first bank on Wall Street to fully control a mainland securities firm.

Morgan Stanley is “a big beneficiary of this opening,” Christianson said. She called the company increasing the ownership of its Chinese asset and securities management business from 51% to 100% as a “game changer.”

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