On Friday morning, China’s National Bureau of Statistics announced that the nation’s economy had contracted by 6.8 percent in the first quarter of 2020. The shocking news ends a period of unrestrained growth dating back to 1976. For nearly half a century, China has enjoyed impressive economic growth and a dramatically improved standard of living. Notably, China’s economy had still managed to grow every quarter even during the challenges of Tiananmen Square and the global financial crisis of 2008.
It took the Covid-19 pandemic to reveal national weaknesses that challenge the widely held view of a future global economic system led by China.
Two of China’s top global trading partners, the EU and the US, have seen dramatic Covid-19-related economic declines, which threatens the global economy and therefore threatens China. Demand for China’s products has decreased due to the outbreak.
The country has yet to pass a spending package to support its national economy as the US and EU have. High government debt coupled with a weakening business sector make a quick recovery very difficult and social distancing measures continue to limit economic activity. China’s economic model looks more like a standard advanced, interconnected economy than the king of the hill it did in even last year. This pandemic will force China’s position in the world to be seen in a clearer light.