China’s economic triumphalism gets harder to take

Zoomlion Heavy Industry Science and Technology

22/12/2020 01:47

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Pete Sweeney
    HONG KONG, Dec 22 (Reuters Breakingviews) - China’s speedy
recovery from the pandemic will get harder for the world to take
in 2021. Rapid containment of Covid-19 after it emerged in Wuhan
let President Xi Jinping restart factories quickly, helping
companies seize record export market share. With the renminbi
strong, a resurgence of overseas M&A will come next. Struggling
governments, especially in the developing world, will find
China’s cash difficult to resist.
    It’s unsurprising that China has outperformed. First into
recession, draconian measures helped the country leap out first
too. But even as it sealed off the viral epicentre in Hubei,
flights from China kept landing in overseas airports, helping to
set off a pandemic that will have shrunk the global economy by
5% in 2020, estimates the World Bank.
    That’s why Europeans and Americans may find China’s recent
trade performance galling. By July, China’s share of global
exports reached a record 14%, a share not enjoyed by any country
since the United States in 1981. Exports by value expanded 3%
year-on-year that month to $158 billion, even as rich-country
exports shrank 7%. In short, overseas demand did far more to
support China’s recovery than the other way around.
    The deficit spike is due in part to China’s dominance of
medical equipment, and frozen offshore tourism, both of which
will revert. Even so, Chinese manufacturers are exploiting the
discombobulation of foreign rivals. Zoomlion  000157.SZ , a
rival to Caterpillar  CAT.N , boasted in its first-half earnings
report that it finally managed to break the “long-term monopoly”
of Western competitors in Malaysia. 
    There might be another irritant in the offing. The yuan
rallied over 6% against the dollar in 2020, positioning China
Inc to restart overseas dealmaking, which dropped after foreign
governments began blocking transactions and Beijing grew
concerned about overstretched balance sheets. 
    The currency’s newfound strength has Beijing encouraging
outward investment to offset speculative inflows. While
diplomatic tensions may keep barriers up in Western markets,
poorer nations like Turkey, where the yuan had appreciated 29%
against the lira by mid-December, may be happy to let Chinese
buyers save struggling local employers. State-owned giants are
already snapping up assets in Latin America.
    For politicians who were trying to contain China before
Covid-19 wrecked their economies, watching it snap up distressed
assets may be a bitter pill to swallow. They might have to choke
it down anyway.   
    On Twitter https://twitter.com/petesweeneypro
         
    -  For previous columns by the author, Reuters customers can
click on  SWEENEY/ 
    - SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS: http://bit.ly/BVsubscribe
 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic: China share of world trade    https://tmsnrt.rs/2WvhoR7
BREAKINGVIEWS-Zoom’s China conundrum poses division problem   
 urn:newsml:reuters.com:*:nL4N2DO1T2
BREAKINGVIEWS-Even Zoom's lockdown boom needed Amazon delivery  
   urn:newsml:reuters.com:*:nL1N2DG1B4
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Rob Cox and Karen Kwok)
 ((pete.sweeney@thomsonreuters.com; Reuters Messaging:
pete.sweeney.thomsonreuters.com@reuters.net))