After an initial cover-up and more than 3,000 deaths, China appears to have brought COVID-19 under control, just as the spread of the coronavirus is accelerating across the U.S. and Europe. With China's domestic-demand driven economy set to rebound and mainland investors avoiding the panic that has smacked western markets, its economy could put a floor under global growth and offer a safe haven to investors.

Progress towards controlling COVID-19 is key

When thinking about prospects for the Chinese economy through the rest of 2020, one of the most important factors is whether coronavirus remains under control.

At this point, China appears to have wrestled COVID-19 into submission. Over the five day period ending March 18, the average number of daily new cases was 21. During the five days ending February 18, the average was 2,067 new cases per day.

China's progress in containing the virus gives hope to and offers lessons for the rest of the world. A study by a team of researchers from the U.K., U.S. and China found that the non-pharmaceutical interventions (NPIs) used in China were effective—especially early case detection by testing—and contact reduction (social distancing). Without those measures, “the number of COVID-19 cases would likely have shown a 67-fold increase.”

The study also concluded that delays in implementing these NPIs were costly. “If NPIs could have been conducted one week, two weeks, or three weeks earlier in China, cases could have been reduced by 66%, 86% and 95% respectively, together with significantly reducing the number of affected areas.1

The number of hospitalized patients with COVID-19 fell to 7,263 on March 18, down from a February 17 peak of 58,016. Excluding Hubei, where Wuhan is the provincial capital and where the outbreak began, only 271 patients were in hospital across the rest of mainland China. The recovery rate is now 87% nationwide (up from 19% a month ago), and 97% excluding Hubei.

In China ex-Hubei, there have not been any new local cases (as opposed to cases in people arriving from overseas) since March 12. Continuing to keep the virus under control is critical, as COVID-19 is the root cause of the China's current economic distress.

Unfortunately, it appears that the coronavirus situation is getting worse in much of the rest of the world just as it is improving in China.

Economic damage in China so far

A few days ago, China published the worst macro data since the Tang Dynasty.

Retail sales declined 21% year-on-year (YoY) in nominal terms, and 24% YoY in real (inflation-adjusted) terms during the first two months of the year. Industrial value-added fell 14% YoY during January/February, including a 27% month-on-month decline in February, when the virus was at its peak. Electricity generation declined 8% YoY in January/February. Fixed asset investment was down 25% YoY during the first two months.