China’s Growth Outshines World’s Gloom

As the rest of the world wrestles with surging COVID-19 cases and plummeting economic growth data, China appears to be functioning in a different universe, at least over the second half of 2020.

After enduring the initial and major outbreak at Wuhan at the start of the year, the Chinese government’s ultra-strict lockdown and control measures are paying dividends for that country.

Latest data from the International Monetary Fund (IMF) indicates China stands alone as the only country that can expect to experience positive economic growth this year. While the predicted growth figure of 2 percent is well back on the usual 8-10 percent a year, it eclipses anything any other country is experiencing.

IMF’s predictions for other countries makes for grim reading, with their economic growth figures on the scrap heap. Australia is predicted to be down 6.3 percent, United States 9 percent, New Zealand 12 percent, Italy 12 percent and the United Kingdom a massive 20 percent.

Even more remarkable for China has been the V-shaped surge out of the 6 percent negative growth experienced in the first quarter, bouncing back to third-quarter growth of 4.9 percent.

These figures mean China is now the largest contributor to global economic growth, accounting for about 28 percent and putting it ahead of the United States for the first time. The recent Singles Day retail celebration highlighted just how strong the rebound is.

The November 11 splurge saw consumers celebrate their relative freedom by laying down an eye watering US$56 billion of expenditure at online purchasing retailer Alibaba, breaking even last year’s record.

Ironically, it is the global pandemic that has attributed to this success.

Consumers are unable to travel abroad, an activity becoming more popular with the burgeoning middle classes, and something that has accounted for Chinese tourists quickly forming New Zealand’s second largest market after Australia accounting for 400,000 tourists a year prior to COVID travel bans.

That lack of tourism spending has Chinese consumers focusing on spending at home, on food, household goods and some domestic travel. Chinese media has reported consumer splurges on high value food items including the likes of Hairy crabs given as gifts selling for US$400 as a box of eight, wrapped in special gift boxes.

For New Zealand, despite the loss of tourism our primary sector is enjoying the benefits of this “stay at home” behaviour.

While dining out expenditure has dropped off by 40 percent, in- home food expenditure is up 15 percent and this includes online purchases of all food types.

Food delivery has surged 65 percent as restaurants have migrated online, and Alibaba reports a lift of 34 percent in sales, driven largely by online food purchases.

An increasing awareness of food’s health-giving properties, and a desire to boost immunity to disease has been a benefit for the likes of New Zealand SunGold kiwifruit and Manuka honey, often viewed as a medicinal food product by consumers and experiencing a double-digit surge in demand.

Already popular prior to COVID, SunGold kiwifruit are benefitting from not only their high nutritional value, but the natural benefit of having a protecting skin in a retail environment where consumers are hyper-sensitive to contamination risks.

The health-giving value of milk, boosted by a concerted government-led effort to increase dairy consumption for health’s sake, is also helping embed a level of certainty and stability into the dairy product market.

Consumers have gained an appetite for many dairy products unheard of, or untasted, in the West as processors manage to combine milk products into multiple savory and sweet type products.

Further reinforcing New Zealand’s position as a quality food supplier is a growing demand for red meat among middle-class consumers. As pork supplies have plummeted by as much as 40 percent thanks to African Swine Fever, beef sales are surging as consumers search for a protein replacement, and the price gap between traditionally cheaper pork versus beef has diminished.

Underpinning New Zealand’s favourable primary products is the free trade agreement which helped give this country’s exporters a “first mover” advantage. Personal trading relationships and links were forged early, and their strength has proven invaluable since COVID ended face-to-face contact.

The positive news in a very unstable and uncertain global market is playing well for the primary sector.

Duncan Ross, Bayleys’ national director rural says the rural real estate market is reflecting the recognition that this country’s primary sector is more than holding its own, with strong buyer interest this spring in a wide range of properties across the pastoral and horticultural spectrum.

“Whether it is wine from Marlborough, milk from Waikato or cherries from Otago, there is an appreciation there among buyers that the real engine room of our economy lies in the provinces, and COVID’s impact has only reinforced that,” says Duncan.

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