The Race for Economic Recovery : China v. U.S.
Written by: Jamie Davila, Associate Editor
Covid-19 has disrupted the global economy for months, shutting down virtually every industry worldwide. As countries began to grasp and contain the outbreak of new cases of the virus, their economies have commenced the recovery process. Every nation is employing their own economic recovery plan; however, the World Bank has projected that the global economy will contract 5.2% by summer 2021. The main economies to examine their road to recovery are the two major economies, China and the United States.
Considered the epicenter of the corona virus outbreak, China has distinguished themselves from the world with their rapid economic recovery. China’s implementation of a rigorous lockdown, tracking policies to curb the influx of new cases of the virus, government spending, and loans have succeeded in showing a rapid upbeat to their economy. The main focus of the Covid-19 response policies was in stabilizing employment, basic livelihood, company support, food and energy security, stable supply chains, and efficient government operations. According to CNN Business, since the implementation of the internal spending and response policies, energized investors in a consumer economy have fueled the economic rebound, which it leading to an increase to China’s GDP of 1.6% by the end of this year. Although the industrial sector of the economy is quicker to recover, 60% of China’s GDP is dependent on consumption making it difficult to incentivize citizens to spend in a sluggish economy. However, it is noted that the Chinese stock market has increased 12% since the beginning of the year indicating that stock in the food, beverage sector, and the tourism sector is making a swift recovery. Furthermore, with China giving its citizens pre-paid vouchers for specific products and their grapple on controlling the virus has allowed a gradual reopening of non-essential business and returning to “normalcy” has increased consumption. Which in turn, has allowed tourism to resume during the holidays to recover at nearly 70% compared to the previous year, according to China’s Ministry of Culture and Tourism. This is another indicator of the speedy recovery that the Chinese economy is experiencing.
In comparison to China, the U.S. economy has remained in a lethargic state since the pandemic began. The Coronavirus Aid, Relief, and Economic Security Act (CARE Act) was the largest stimulus bill to be passed in American History. It was designed to expand unemployment benefits to curb the complete shutdown of the economy which has not been seen even during the Great Depression. The two trillion dollars stimulus provided a benefit of a cash payment of twelve hundred dollars to the class of citizens that have filed a tax return and made a gross income less than or equal to $75,000 or be a Social Security recipient. This prerequisite still ostracizes low income households and undocumented people at the forefront of the crisis who do not fall in either category. Another high priority of the bill was to inject funds in the small business loan program to help small business stay afloat during the closure with the creation of the Paycheck Protection Program. However, a high portion of the funds available in the bill for small business owners were accessed by major corporations in their bail out by having language in the bill that allowed major corporations such as Shake Shack to apply for and be awarded loans for having less than 500 employees per physical location. To combat this issue, the Department of Treasury issued a guidance compliance that now requires business to certify that they were unable to obtain credit anywhere else.
The hardship that small businesses are enduring has propelled the unruly sentiment of “reopening” the states before the coronavirus cases in the state is deemed low enough to safely reopen all nonessential businesses to the public. The failure of the CARE Act has led to further politicizing the pandemic’s effect on both the economy and public health safety. With increasing tensions, the Trump administration has been very vocal with their rhetoric in justifying pre-mature “reopening” of hotbed states for the sake of saving the economy. Further, with the more recent constant negotiations of a second round of a Covid-19 relief bill being delayed and scrapped has added a new level of uncertainty in an already unstable stock market factored in with an aggressive election year. It is evident that the recovery of the American economy is dependent on the proper plan and guidance of the next administration in the following year.
The economic recovery plans implemented by United States and China have the central focus of saving their economy by injecting funds into their domestic businesses and focusing on consumerism. However, like the global economy, economic recovery is dependent on the speed of the development and administration of a successful Covid-19 vaccine. Until then, the world is living with an uncertainty that can potentially repeat itself if another outbreak occurs forcing all businesses both domestic and international to grind to a halt once more until the virus is once again under control.
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