Delta variant on the Chinese economy Essay.
Learning Goal: I’m working on a economics writing question and need an explanation and answer to help me learn.
Read this article from Bloomberg (click here (Links to an external site.)) about how the Delta variant might affect China’s GDP. In your opinion briefly explain whether you feel the article is correct or not that the Delta variant will reduce GDP growth in China this year? Also, in your opinion will a change in GDP growth in China affect US GDP growth or not? There is no correct or incorrect opinion.
Be sure to use at least 2 course concepts to support your opinion in your answer. Your answer must be provided in the text box below and be between 300-500 words.
The impact of the delta variant on the Chinese economy
The covid pandemic has taken a turn for the worst with the emergence of the Delta variant that is highly contagious and was first discovered in India around December 2020. The new variant spread to the rest of the world and now accounts for more than 99% of emerging covid cases (Katella, 2021). The delta variant has wreaked havoc on major economies around the world, particularly China. According to a Bloomberg article (Bloomberg, 2021), it is expected that the delta variant will further strain China’s already impacted economy. I support the prediction of the article regarding the impact the delta variant will have on the economy of China. The net exports, total value of goods produced, and total spending of the disposable income in the Chinese economy, which are all relevant markers in the GDP growth rate, will decrease due to the following factors leading to a slowed growth rate.
The total value of goods and services produced in China will be affected by the impact that the new covid restrictions will have on the Key pillars of the Chinese like tourism, manufacturing, and service industries which will be disrupted. Various factories have been shut down, and millions of workers have been instructed to get tested first. The new measures have negatively impacted the tourism industry and services offered since many cities have introduced new quarantine measures, resulting in both domestic and international air travel being banned. The measures took effect during the peak tourism season of august during the summer school breaks.
The purchasing ability by Chinese consumers was cut back as they feared the worst during the pandemic, which affected consumption and expenditure, dealing a massive blow to many companies already struggling to make sales. Many economists project a slump in the country’s economic growth (He, 2021). The Goldman Sachs analysts predict China’s economy to grow by 8.3% by the end of 2021 from the previous 8.6% estimate. The ultimate effect was reducing the total value of goods and services produced in the economy leading to a reduction in real GDP and a slowed growth rate.
In recent years, China has emerged to become one of the biggest trading partners with the U.S. (“U.S. imports – ranking of the top trading partners 2020 | Statista,” 2021). The delta variant’s implications will most likely negatively impact the U.S. economy, specifically affecting the value of net imports and exports, which are essential components of the GDP. Various terminals and ports were forced to close down in China when some workers tested positive for Covid. Meishan terminal in Ningbo-Zhoushan port accounted for a large percentage of global trade and was affected (He, 2021). The resultant effect was shipping delays around the world for the various consumer goods. The USA is particularly reliant on imports from China, and thus, the delays in global trade will negatively impact the economy (Dollar & Newby, 2020). First, companies reliant on Chinese goods for manufacturing processes will be forced to cut down on production.
Secondly, the delays coupled with the increase in demand will increase the prices of commodities, leading to the reduction of the purchasing power of American consumers, reduction in consumption and spending, and ultimately inflation. Alternatively, several companies may end up offshoring some of their activities, reducing the economic output of the USA. All those factors, among others, will result in a decrease in the real GDP of the USA, leading to slow growth rates.
Bloomberg. (2021, August 4). China’s Delta Outbreak Cuts Travel, Prompting GDP Downgrades. https://www.bloomberg.com/news/articles/2021-08-03/china-s-latest-outbreak-threatens-to-derail-consumer-recovery
Dollar, D., & Newby, A. (2020, August 10). How is COVID-19 affecting U.S. trade? Brookings. https://www.brookings.edu/podcast-episode/how-is-covid-19-affecting-us-trade/
He, L. (2021, August 13). China growth forecasts slashed as delta variant spreads across the country. CNN. https://edition.cnn.com/2021/08/13/economy/china-economy-delta-impact-intl-hnk/index.html
Katella, K. (2021, June 28). 5 things to know about the delta variant. Yale Medicine. https://www.yalemedicine.org/news/5-things-to-know-delta-variant-covid
U.S. imports – ranking of the top trading partners 2020 | Statista. (2021, March 5). Statista. https://www.statista.com/statistics/186601/ranking-of-the-largest-trading-partners-for-us-imports-in-2010/