Economy 'Pandenomics', Jano and a new leadership

‘Pandenomics’, Jano and a new leadership

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Although China is the clear winner of the crisis today, in the long term it will see its strength slowed if it does not adopt reforms.

January, the month of the two faces of the Roman god Janus, has shown us this time that we cannot leave behind how 2020 closed. The new year has begun marked by the third wave of the coronavirus and the unknown associated with the appearance of new strains. The negative health evolution not only adds a greater emotional cost and makes us feel more vulnerable, but also delays the recovery expected by an increasingly fragile socioeconomic fabric.

However, It has also shown us the importance of maintaining a vision in the long term in the face of the political, economic and social polarization that the United States is experiencing, the risks that the economic decline of Russia opens and the implications that the pí will have for international politics. Loss of leadership from former Japanese Prime Minister Shinzo Abe last May and German Chancellor Angela Merkel next fall. All this in a scenario in which one of the trends accelerated by pandenomics is confirmed, such as the growing leadership of China. Its economy has confirmed its resilience, registering at the end of 2020 a greater advance than initially projected by international organizations. Specifically, between October and December, its GDP registered a year-on-year rebound of 6.5%, not only above its growth path prior to the Wuhan outbreak (6% year-on-year in 2019), but at its highest level since 2018. In turn, in the whole of 2020 its growth rate was 2.3% per year, exceeding the estimates of 2% from the IMF and the World Bank.

After the drop of 6.8% year-on-year in the first quarter of 2020, its recovery is supported by fiscal and monetary stimuli, better control of the pandemic at the national level, the dynamism of its industry and the rebound in its exports. These registered an increase of 18.1% year-on-year in December, mainly due to the increase in global demand for technology and healthcare products. However, the deterioration in the epidemiological situation could weigh down its foreign sector in the short term, as reflected in the PMI (purchasing managers index) of new export orders, which registered a slight setback at the end of last year.

However, the good performance of the industry and external demand has not been transferred to private consumption. Specifically, retail sales, despite increasing 4.6% year-on-year in December, contracted 3.9% annually in 2020 as a whole, mainly due to the rebound in private savings and the weakness of the labor market. Additionally, the recovery in domestic demand could be hampered by the new mobility restrictions adopted by the Government to stop the upturn in infections, due to its direct implications on the lunar new year holiday.

These dates They not only confirm China as the only major economy on the planet that has not suffered a contraction due to COVID, but also that its nominal GDP could exceed that of the United States in 2028, two years earlier than estimated so far. All this in a context in which forecasts project that its growth rate will be around 8.1% per year in 2021 and 5% in 2022, conditional on the evolution of the pandemic and the effectiveness of the plans for vaccination at a global level, as well as the recovery of advanced economies.

A situation that confirms that the 46th president of the United States, Joe Biden, beyond the internal key challenges that he will have to face how to close the polarization of his country, Controlling the health crisis and building a path to sustainable and inclusive recovery, it must consolidate and relaunch its international leadership in the face of the growing role of China. A fact that is reflected both in its growth data and in its increasing investment weight and in the development of infrastructures, especially through its Belt & Road initiative, which extend between other countries from Eastern Europe to Poland. and Hungary, with what it could entail for the EU project.

In this context, Biden has sent a clear message about his commitment to multilateralism and the new tone of his international politics, setting as cornerstones the relaunch of relations with its traditional allies of the North Atlantic Alliance and the consolidation in the Asia-Pacific region with Japan, Australia, South Korea and India, among others. A fact that has been verified on the first day of his mandate with the signing of executive orders such as the return of the United States to the World Health Organization and the Treaty of Paris against climate change, whose commitment could be reflected in an agreement on environmental taxation with the EU that could negatively affect the Chinese industrial sector. All this together with It could foreseeably choose in the short term to maintain the tariffs set on China by Trump, while at the same time reviewing those that it imposed on European products and resuming its role in the World Trade Organization. Furthermore, as the latest data from the Pew Research Institute shows, European citizens have regained confidence in the role of the United States, which would favor greater cooperation between the two blocs.

In this context, Beijing must also be aware that it faces challenges similar to those of advanced economies. Thus, In the absence of structural reforms, its long-term growth could slow down due to the aging of the population, the loss of the working population, high indebtedness, the low role of women and their levels of inequality.

If something has made the first month of 2021 clear to us, it is that cooperation must be the priority to control the health crisis and overcome its emotional, socio-economic, and geopolitical consequences. The other face of Jano tells us that to make it possible, the time has come for new leadership.

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