As China recovers from the impacts of the coronavirus outbreak, it is surprising to see China operating at 90% normal levels. Considering the hit China took 90% seems very impressive, but that 10% that is not operational has left almost 6.6 million jobless. In the worst unemployment figures in decades, China has a lot more things to worry about after the pandemic is almost controlled in the country. The situation in China is something all the countries will eventually face in the coming months as they battle the pandemic.
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It would be fair to assume that worst has passed especially China. But we would we far from the truth. The world economy is hit so hard by the pandemic that the extent to which our lives will be affected is unfathomable. It is true that Restaurants, cafes, classrooms are teeming with people in China but nothing seems normal.
The rest of the world has to look forward to China regardless of how countries have dealt with the pandemic. Functioning at 90% of the normal levels seems all right given the chaotic past we are coming from but It’s also clear that once businesses are open they will have to operate with social distancing in place.
In China, large chunks of everyday life are missing. The economy that collapsed in January has not recovered fully as prophesized by media reports. Consumer footfall in restaurants, shops, and hotel occupancy is still down by around 50%. The 10% we talked about earlier are these activities. All the stuff that is hard to do if you’re trying to social distance falls under this. The so-called ‘Fun Spending’ is no more there. People are a bit apprehensive about going to pubs, bars, restaurants, hotels and even taking domestic flights. It is understandable. As soon as people leave their workplaces they hurry back home so that they minimize the risk of infection, thus the after-work parties, movies, and dinners are all gone.
In Sweden, most citizens were never told to sit at home during the pandemic, but in recent months the Swedish rate of spending has been mirroring the neighboring country Denmark that applied strict lockdown. The daily restaurant market fell by 70% last month, as economic instability and infection concern took precedence over fun spending. The same pattern was seen in Danish spending that dropped by 29% in the lockdown period.
The government cannot decide how the economy will work because it is the spending pattern of the people it governs that is deciding how the economy will progress.
The lockdown itself is not really influencing behavior that much but the true economic impact of imposing lockdowns will take time to emerge in China. Several months passed in China and forcefully China lifted the lockdown before bankruptcy numbers started to rise. If we think we are through the worst of it, we end the lockdown, and then actually things start to get even worse than we had expected.
This economic lull has never been experienced by any country. It is heartening to see eight in Europe’s five largest economies having to support one in five workers currently in a special scheme where the state pays their wages. It’s only as this support is gradually withdrawn that the wider cost of COVID-19 will become clear. The time ahead feels more uncertain because no one really knows how businesses and households will be able to survive weeks and months of much lower incomes.
There are a series of reports that economies are planning to roll out UBI or Universal Basic Income. This income is guaranteed to all the people living in a country. CEO’s of major businesses like Richard Branson, Elon Musk and Mark Zuckerberg have supported this scheme. The scheme was actually formulated for job losses that AI and Machine learning would bring, but the ongoing pandemic has left the government thinking if they can roll out the scheme much earlier as people are about to be hit hard by joblessness and no way to support their family.
The fun spending element will no longer exist and wants will give way to need. Governments around the world are trying to tackle the effects of lockdown but after experiencing what China is going through it is hard to believe that everything will just snap back to normal.
Tell us what do you think about how our life will be after the lockdown ends?