Much of the global economy is still reeling from lockdown measures imposed to contain the coronavirus pandemic. Restrictions that include
workplace closures and stay-at-home orders significantly cut down
economic activity worldwide — dampening any prospects for growth this
year.
But China, where the coronavirus first emerged, is often cited as one of the few economies that could still grow. The Chinese recovery is
“going to look very impressive” with a growth of 5%-6% quarter on
quarter in April-June, following a contraction in the previous three
months, said Michael Spencer, Deutsche Bank’s chief economist and head
of research for Asia Pacific.
“The domestic demand part of the Chinese economy has recovered well,” he told CNBC’s “Squawk Box Asia.”Spencer said “a broad range of
indicators” — such as auto and property sales — are “returning to
normal” in China. The country’s exports have also been better than
expected, but could get “a lot worse” in the next few months given the
economic weakness in China’s major export destinations, he added.
‘Tough road’ ahead for U.S. economy
The biggest risk to the Chinese — and global — economy is the U.S., according to the economist. He explained that the U.S. is reopening “too
soon” from lockdown measures, which could trigger another wave of
infections and further rounds of restrictions.
That would leave the U.S. economy struggling, in spite of a surprise jump in employment gains, added Spencer.Steve Hanke, a senior fellow at
American libertarian think tank Cato Institute, said the U.S. economy
could take many years to recover from the “enormous” damage.
“And to repair it, it’s just not going to happen immediately. I don’t think we will reach the level of pre-crisis GDP until ... 2022 and
probably way beyond that,” he told CNBC’s “Street Signs Asia” on
Monday.Tensions between the U.S. and China, which have been worsening in
recent months, are expected to be “exceptionally sensitive” this year,
said Deutsche Bank’s Spencer.
The U.S. is scheduled to hold presidential election in November. Incumbent President Donald Trump will make China “the main part of his
reelection pitch” by touting that he’ll be tougher on Beijing than his
presumptive Democratic challenger, Joe Biden, added Spencer.So the
rhetoric between China and the U.S. has already gotten very worrying,
and I think can only get worse through this summer,” he said, adding
that “there’s no prospect” for the two countries to conclude the second
phase of the trade deal.
The two countries signed the “phase one” trade deal in January, which put a pause to their tariff war that lasted over a year. The Trump
administration had aimed to start talks on the second phase of the deal
before the U.S. November election.
But even the phase one deal appears to be “hanging on by a thread,” said Spencer. “The risks are that even that phase one ... gets broken or
gets abandoned in the next few weeks and months.”
