In addition to a diplomatic contention of increased intensity, China remains the indispensable starting point for a global economic recovery after the Covid-19 coronavirus epidemic.

In other words, everyone – including the United States – hopes that the health crisis is duly over in China and that the Chinese economy will soon be able to function normally in order to limit the drop in global GDP.

Trump’s diplomatic and trade relationship with his counterpart Xi is of paramount importance, but given the state of the existing production infrastructure, most of the major Western corporations depend on China.

In short, any difficulty of Chinese production to return to its pre-crisis pace may indicate both that the health risk remains with the fear of a second wave and that supply must necessarily be reduced to adapt to falling demand – in addition to significant inventories to be sold off.

Also, the unprecedented drop in China’s GDPdown 6.8 percent in Q1 2020 compared to Q1 2019 – underscores the severity of the economic shock and should therefore prompt economists and investors to be cautious.

The reopening of the economy is the priority of the Chinese government and the majority of factories are reportedly working despite low order books due to the strict health measures implemented for weeks first in Europe and then in the United States.

The fight against a recurrence of the epidemic is the other priority of the Chinese government, which is continuing to apply sanitary measures – including a ban on inter-provincial travel – that for the moment prevent a complete return to normal.

Although the Chinese are back to work, they have not yet resumed their economic and social habits, with attendance at places of consumption reduced by around 50 percent compared to the pre-crisis situation.

This information lends credence to the scenario of a gradual or even slow recovery of the global economy while the epidemic is not even over yet. It also confirms China’s increasingly central status within the international ecosystem.

Contents published on Cyceon.com do not constitute investment advice.

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