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China struggles with economic recovery; Xi Jinping turns to home market

#China, the first country to restart economic activity after the coronavirus outbreak, is going through a torrid time on the road to economic recovery.

Growing tensions with the #US and resentment among other nations over Beijing's handling of the #coronavirus outbreak is beginning to bite. With exports dropping drastically, companies dependent on exports are shutting shop. Over 4.6 lakh companies have closed, of which over 26,000 are export-oriented companies in the Jan-March quarter, corporate registration database Tianyancha reported in early April.


Also, new registrations of businesses have seen a 29 per cent YoY drop in the Jan-March quarter. Kim Ng, Managing Director of kitchen gadgets producer Ko Fung, told news agency AFP that he's receiving no new export orders and that production has gone down by 30-50 per cent in March-April. Thousands of exporters like Ko Fung have either shut their businesses or are cutting down production, leading to huge layoffs.

UNCERTAIN EXPORTS

China's #exports fell by 6.6 per cent year-on-year in March and imports slipped 0.9 per cent. But there was temporary relief in April with exports rising 3.5 per cent from a year-ago period. China sold 27.8 billion face masks and 130 million personal protection equipment to the world in March and April. But that may not be a sustainable model as countries begin to emerge from the peaks of coronavirus crisis. Imports, however, plunged 14.2 per cent signalling a deep slowdown in domestic demand as well.

The damage to exports has also contributed significantly to China's #unemployment, which was at 5.9 per cent in March and 6 per cent in April. As per the Economist Intelligence Unit (EIU), these numbers are gross underestimate and that China's official unemployment rate may be as high as 10 percent for the month.


Most countries have been under #lockdown in recent days which has led to Chinese shipments being cancelled and few new orders are coming in. In fact, its exporters are looking for domestic markets to sell products.

US-CHINA RIVALRY

Meanwhile, the US has ramped up pressure on the Chinese government with President Donald Trump nudging American companies to shift base from China. "We just signed a trade deal, the ink wasn't dry and all of the sudden this floated in. We are not going to take it lightly," Trump said participating in a Listening Session with African-American Leaders in Michigan last week.

Trump has also accused the World Health Organisation(#WHO) of being hand-in-glove with China and Xi Jinping in hiding the risks of coronavirus from the world. Director-General Tedros Adhanom Ghebreyesus recently bowed to probe calls as over 120 member states, including India, sought an "impartial" investigation into the virus source via an EU draft resolution.

DWINDLING DOMESTIC DEMAND

The UN-backed resolution to probe China's role coupled with the US' continuous push to hold China accountable for #COVID19's deadly march has forced China to 'think inward' on its export strategy.

As a result, China is preparing for a new master plan, the one that's not export-driven, by pushing for a major revival of domestic demand to offset the losses.

Chinese President Xi Jinping told economists last week the country would have to accelerate the building of a "complete domestic consumption system". "For the future, we must treat domestic demand as the starting point and foothold as we accelerate the building of a complete domestic consumption system, and greatly promote innovation in science, technology and other areas," he said.

Economists also believe China is preparing for the worst-case scenario, with the Donald Trump-led United States drumming up support with his 'anti-China chorus' and more countries like Australia, Britain and Germany tagging along while avoiding direct confrontation.

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