Page 40 - 2021 White Paper
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1 White Paper on the Business Environment in China
with some economists warning that the situation expected the global economy to shrink to 3% in
could become far worse. But both countries 2020. Only a handful of economies — such as
reported sharp declines in retail sales as lockdown China and India — were expected to grow in 2020.
measures during the pandemic forced many stores While the fund penciled in a rebound of 5.8%
to shut and kept consumers at home. A surge in growth in 2021, it said that recovery is “only partial
online sales reported by some retailers, such as as the level of economic activity is projected to
Amazon, failed to stem the overall fall. Economists remain below the level we had projected for 2021,
warned that consumers may not resume spending before the virus hit… The cumulative loss to global
even after lockdown measures were lifted. That GDP over 2020 and 2021 from the pandemic crisis
was evident in the “slow improvement” in retail could be around US$9 trillion, greater than the
sales in China even after the country allowed a economies of Japan and Germany, combined (Lee).
gradual reopening of businesses, said analysts
from Oxford Economics. “The slow improvement According to the Covid-19 and Peace report
in household spending underpins our view that, released in July 2020 by the Institute for Economic
globally, consumers are unlikely to rush back to Peace (IEP), the US GDP fell 1.2% from the prior
the shops as soon as restrictions are lifted,” they year in the first quarter of 2020 – an annualized
wrote in a report. A broader hit to the services decline of 4.8%. The euro area experienced a
industry was observed globally, with businesses significant decline of 3.8%, while China’s production
in the transportation, real estate, and travel decreased by 9.8%, which was equal to an annual
and tourism sectors experiencing some of the rate decrease of 34%. When it became obvious that
largest declines in activity. Manufacturers, already the contagion would not be constrained to East
weighed down by the US-China trade war, once Asia in February 2020, global financial markets were
again came under pressure as the coronavirus severely affected by the Covid-19 crisis as evidenced
spreads around the world. The Covid-19 pandemic by the Morgan Stanley Capital International (MSCI)
first hit manufacturers outside China that rely on World stock index decreasing by 34%. The global
factories in the Asian economic giant for materials stock markets recovered after March, but there
and parts — also known as “intermediate goods” were expected to be more downswings. The
— to make their own products. Chinese factories extent of this epidemic and economic instability
suspended operations for longer than expected as may have been misinterpreted by the financial
authorities worked to contain the virus. As more markets. Furthermore, the increased funds for
countries impose lockdown measures, a greater more investment have been the result of the
number of manufacturing firms were hit. Some stimulus programs and lowered interest rates.
were forced to temporarily shut down, while those The emergence of different tendencies among
that remained open faced restrictions in getting corporate and government bonds was a reaction
their supply of intermediate goods and materials. to the uncertainties brought about by the crisis.
On top of that, a reduction in demand for goods Since the private sector was confronting more
exacerbated the challenges that manufacturers risks there was a swift increase in yields while
face. As a result, factories across the US, Europe, long-term government bonds saw a decrease
and Asia reported declines in output. Global trade, in yields along with their prices rising. Several
which was already slowing in 2019, was expected organizations released projections and estimates
to be weighed down into 2021. The World Trade to help stakeholders gain insight into the severity
Organization, in its April 2020 forecast, said global of the economic recession. The IMF expected rapid
trade volume could plummet by 12.9% or 31.9% economic decline of 3% for the world economy in
in 2020 — depending on the trajectory of the 2020 and recovery in 2021. The expected decline
global economy “Under both scenarios, all regions is serious for North America and Europe’s main
will suffer double-digit declines in exports and developed economies along with China and
imports in 2020,” the W TO said. The coronavirus India projecting to not contract. These forecasts
pandemic’s hit to economic activity has led many are being made under the assumption that the
institutions to slash their forecasts for the global pandemic would be contained, rapidly overcoming
economy. The International Monetary Fund, whose trade conflicts and the rising availability of capital to
assessment of the economy is widely followed, ease the global crisis (Bekmirzaev, Outlook).
40
with some economists warning that the situation expected the global economy to shrink to 3% in
could become far worse. But both countries 2020. Only a handful of economies — such as
reported sharp declines in retail sales as lockdown China and India — were expected to grow in 2020.
measures during the pandemic forced many stores While the fund penciled in a rebound of 5.8%
to shut and kept consumers at home. A surge in growth in 2021, it said that recovery is “only partial
online sales reported by some retailers, such as as the level of economic activity is projected to
Amazon, failed to stem the overall fall. Economists remain below the level we had projected for 2021,
warned that consumers may not resume spending before the virus hit… The cumulative loss to global
even after lockdown measures were lifted. That GDP over 2020 and 2021 from the pandemic crisis
was evident in the “slow improvement” in retail could be around US$9 trillion, greater than the
sales in China even after the country allowed a economies of Japan and Germany, combined (Lee).
gradual reopening of businesses, said analysts
from Oxford Economics. “The slow improvement According to the Covid-19 and Peace report
in household spending underpins our view that, released in July 2020 by the Institute for Economic
globally, consumers are unlikely to rush back to Peace (IEP), the US GDP fell 1.2% from the prior
the shops as soon as restrictions are lifted,” they year in the first quarter of 2020 – an annualized
wrote in a report. A broader hit to the services decline of 4.8%. The euro area experienced a
industry was observed globally, with businesses significant decline of 3.8%, while China’s production
in the transportation, real estate, and travel decreased by 9.8%, which was equal to an annual
and tourism sectors experiencing some of the rate decrease of 34%. When it became obvious that
largest declines in activity. Manufacturers, already the contagion would not be constrained to East
weighed down by the US-China trade war, once Asia in February 2020, global financial markets were
again came under pressure as the coronavirus severely affected by the Covid-19 crisis as evidenced
spreads around the world. The Covid-19 pandemic by the Morgan Stanley Capital International (MSCI)
first hit manufacturers outside China that rely on World stock index decreasing by 34%. The global
factories in the Asian economic giant for materials stock markets recovered after March, but there
and parts — also known as “intermediate goods” were expected to be more downswings. The
— to make their own products. Chinese factories extent of this epidemic and economic instability
suspended operations for longer than expected as may have been misinterpreted by the financial
authorities worked to contain the virus. As more markets. Furthermore, the increased funds for
countries impose lockdown measures, a greater more investment have been the result of the
number of manufacturing firms were hit. Some stimulus programs and lowered interest rates.
were forced to temporarily shut down, while those The emergence of different tendencies among
that remained open faced restrictions in getting corporate and government bonds was a reaction
their supply of intermediate goods and materials. to the uncertainties brought about by the crisis.
On top of that, a reduction in demand for goods Since the private sector was confronting more
exacerbated the challenges that manufacturers risks there was a swift increase in yields while
face. As a result, factories across the US, Europe, long-term government bonds saw a decrease
and Asia reported declines in output. Global trade, in yields along with their prices rising. Several
which was already slowing in 2019, was expected organizations released projections and estimates
to be weighed down into 2021. The World Trade to help stakeholders gain insight into the severity
Organization, in its April 2020 forecast, said global of the economic recession. The IMF expected rapid
trade volume could plummet by 12.9% or 31.9% economic decline of 3% for the world economy in
in 2020 — depending on the trajectory of the 2020 and recovery in 2021. The expected decline
global economy “Under both scenarios, all regions is serious for North America and Europe’s main
will suffer double-digit declines in exports and developed economies along with China and
imports in 2020,” the W TO said. The coronavirus India projecting to not contract. These forecasts
pandemic’s hit to economic activity has led many are being made under the assumption that the
institutions to slash their forecasts for the global pandemic would be contained, rapidly overcoming
economy. The International Monetary Fund, whose trade conflicts and the rising availability of capital to
assessment of the economy is widely followed, ease the global crisis (Bekmirzaev, Outlook).
40
