China's Economy Amidst the COVID-19 Pandemic: Current Situation, Countermeasures, and Implications for Financial Institutions

Abstract

Prior to 2020, global economic forecasts were on a downward trend. The COVID-19 pandemic has caused a further disruption in economic activity across the world, temporarily ceasing operations in numerous sectors. China, the first country with known cases of COVID-19, has suffered from slower economic growth. Relative to other nations, however, economic damage in China has been mitigated: despite predominantly negative global economic forecasts, the International Monetary Fund projects China to be one of the only major economies to record positive GDP growth in 2020 and 2021. Much of this can be attributed to China’s “Dual Circulation” countermeasures. We examine three lenses through which these measures can be comprehended, as well as key factors for “Dual Circulation” to be sustained. Ultimately, we find that in order for China’s economic recovery to continue over an extended timeframe, an emphasis must be placed on the health of micro, small, and medium-sized enterprises (MSMEs). Capital investment must also remain a continuous driver to sustain domestic circulation.