Don’t Expect China to Rebound Quickly From Coronavirus
Cascading spillovers in trade, supply and demand, and the movement of goods are difficult to reverse rapidly.
It could take a while.
Photographer: Noel Celis/AFP/Getty Images
Even as global authorities struggle to contain the spread of the coronavirus, the market is modeling the economic impact in China as a V: a sharp deceleration of growth this quarter followed by a strong rebound in the second. As such, many have argued that the best analytical approach is to “look through” the crisis, treating its economic effects as containable, temporary and reversible.
I sure hope this is right. The global economy — and, in particular, those countries with more fragile growth dynamics — can ill afford a big shock that has adverse geopolitical and institutional spillovers. Unfortunately, it is still early to declare with confidence the much-hoped-for V-shaped evolution. Indeed, given what I have called the cascading sudden-stop dynamics of the coronavirus for China and beyond, the risk of either a U- or L-shaped pattern for 2020 is still too high to dismiss.