Wuhan- A Classic example for how economies can get back on track post-pandemic

Summary

• Wuhan- the epicenter of pandemic has been able to sail through the crisis, restarting majority of its economic activities on the back of strict lockdown, extensive testing and contact tracing.
• After significant slump of 6.8% in the first quarter, the Chinese economy in the second quarter grew by 3.2% owing to rise in the demand for personal protective equipment and other medical products in the international market.
• Australian economic recovery faces the major hurdle of increasing jobless rate, with Melbourne lockdown sparking fears of second wave of infection.

The terrible disarray overwhelming the world can indubitably be attributed to COVID-19 pandemic, causing market and economic havoc.

Amid such perturbed situation preoccupying most governments and agencies, Wuhan which earlier became the epicenter of outbreak is once again in the limelight, but for all hopeful reasons. The foremost epicenter of coronavirus crisis has now shifted to being an essence of optimism as it appears to get the economy out of hock after months of struggles.

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Wuhan Open slated for October this year sends a strong message concerning the recovery of the city while also radiating hopes to other nations. Notably, Women’s Tennis Association earlier in June released a provisional calendar for the year 2020, which would be dependent upon varying key factors such as safety of the players, necessary government approvals and travel restrictions.

Nevertheless, the international tennis tournament, Wuhan Open will also primarily be conditional on the global infection scenario that would determine international players travelling across for the event.

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Revamping the Economy Via Necessary Measures

Wuhan city went under strict lockdown with draconian measures in place to battle the pandemic. Hubei province, which witnessed majority of the cases in China; however, now appears to be reeling back with the resumption in most of the business activities.

The public services, education and hospitality sector along with other industries appear to be rolling back to the normal.

Economic Growth in the Second Quarter

Chinese GDP has grown by 3.2% in the second quarter post a significant slump witnessed in the early months of 2020, as indicated by the National Bureau of Statistics of China.

The figures are higher than the earlier projections, indicating a potential for V-shaped economic recovery for the Asian country. Notably, in the first 2020 quarter, Chinese economy fell by 6.8%, which corresponded to the lockdown scenario when all the factories and businesses remained shut.

The GDP growth in the second quarter in China stands in contrast against a miserable global economic slump.

Furthermore, China’s job market has also improved as evident from the creation of over 5.6 million jobs in urban areas. The National Bureau of Statistics indicated the unemployment rate in urban areas was at 5.7 per cent in June, 0.2% lower than that in May.

Fitch rating indicated that Chinese recovery is having a positive spillover and optimistic impact for the global scenario as a whole.

Trade Scenario

Chinese economic growth is catalysed by the rising demand for personal protective equipment, masks and other medical products in the international market when the outbreak took the deadly form primarily between April to June.

The US-China tension, however, seems to affect the Chinese export volume, which appears to be shifting away from the US. The trade tensions and virus spat have altogether led to the decline in US exports, while at the same time, the exports to the Asian countries surged considerably.

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Second Wave of Infection

China, however, has massively witnessed troubling scenario post the revival in the economic activities owing to further spike in the cases in Wuhan. Nevertheless, necessary precautionary measures, including massive testing and contact tracing has assisted the country in bringing the situation back in control.

The authorities have set the target to test the entire population of Wuhan, which stands at 11 million and was successfully able to do so for 10.9 million out of the whole population. The substantial productivity boost in the daily testing contributed to limiting the virus spread and getting the economy back on track. The people are yet conforming to the social distancing measures and wearing masks to avoid any further chances of infection.

ALSO READ: Is the Second Wave of COVID-19 Already Approaching?

What it means for Australia: Comparing the scenario of the Two countries

Upside

Australia concerning the spread of the virus is much better placed compared to China owing to the timely placement of necessary measures and quick sealing of the international borders. Australia, on the back of the substantial technological infrastructure, has been able to sail the pandemic storm, with the e-commerce and cloud technologies assisting sustainability of businesses.

Australia witnessed a drop in the economic activities in its second quarter, which coincided with the lockdown, witnessing economic slump of 0.3% in March Quarter. The consumer sentiments appear to be picking up among the Aussies, indicating growth prospects for the country.

Furthermore, a sharp rebound in NAB’s June business confidence is heralding signs of sooner than expected economic recovery, potentially easing fears of prolonged financial crisis.

Downside

While Australia was successfully able to contain the virus, recent spike in the cases in Victoria has garnered concerns for the country. OECD has projected that Australian GDP can fall by 5% in 2020 in case of no second wave of infection. However, in the case of a double hit, the economy may dip by 6.5%.

Subsequently, the rise in infections cases and Melbourne lockdown may impact the Australian recovery process.

Moreover, although China witnessed a similar situation with Wuhan, Victoria’s reboot would depend upon the policy effectiveness to control the situation.

The job scenario in Australian landscape can be another potential issue that can impact consumer sentiments. Australia’s jobless rate has hit 22-years’ low at 7.4% for the month of June. Meanwhile, with the government support through JobKeeper scheme anticipated to be withdrawn in the near time, many believe that the gravity of the employment scenario could further worsen.