What:  Visa estimates that for the first time, China will contribute less to the global recovery than in the past

Why it is important:  Global recovery will rely more on local answers (and customers) than in the past, and China might not bring all the answers to the table.

Since the 70’s, financial and trade integration worldwide lead to a synchronicity of effects during recessions and slowdowns. In the post-crisis recovery periods, China’s contribution has consistently increased. However, even though its share of global GDP has been rising in the past decades, its contribution to the recovery of the 2020-2021 crisis might be lower than in the past.

Visa explains that for this particular recovery process, the two reasons are that:

• China is now producing goods and services that are not necessarily consumed by the US and other advances economies (for instance, book demand has increased +23.9% from January 2020 to January 2021, and so did groceries, +13.5%, cleaning products, +12.5%, all categories that are not supplied by Chinese manufacturers),
• Regarding its five year plan, China is now focusing on its own internal market, focusing less on its past trading partners, leading to a lesser degree of support to the world’s recovery.

Visa estimates that, in the past, China contributed to 19% of the recovery in 2000-2001 (tech wreck), 33% in 2007-2008 (global financial crisis) and 32% in 2014-2015 (mid-cycle slowdown). It forecasts a contribution of 26% for the 2020 Covid-19 crisis.

China's changing role in the global economic recovery