Wuhan, mirror of China’s economic acceleration

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From the top of the Yellow Crane Tower, if you look south, you can see the Optics Valley, the economic and technological development zone of Wuhan. A huge valley surrounded by buildings of more than 30 floors, luxury hotels and international corporations that began to settle in this place in the late 1990s, attracted by the tax incentives promised by the Chinese government to convert Wuhan in one of the most advanced and strongest cities in the country. They did it. In less than a decade, this city with more inhabitants than New York rose to the ninth largest economy in China.

Tourists can also be seen from the top of the Yellow Crane Tower, originally built in 223 to the south of the Yangtze River. There are not as many as a couple of years ago, but in the midst of the global pandemic, that the monuments are open and there are visitors, it is already something remarkable. “We come to support the local economy, which suffered a lot last year from the confinement,” says Yun Xie, a man from Shanghai who has taken a few days off to visit the city with his family.

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“All tourist attractions are now free or at half price. This measure has helped to reactivate tourism in recent months,” says one of the tower’s ticket office.

Wuhan was the first city closed in the pandemic. This week is just one year of that. After 76 days of strict confinement, the blockade was lifted on April 8.

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Gradually, the city has been recovering the old normality. They have been without contagion since May. And the economy, with a GDP that fell by 10.4% in the first three months of 2020, is already close to returning, reducing that fall by nine points, to the numbers of a couple of years ago.

The shops and markets of the main avenues of the city are once again full. Although it is also true that many of the businesses that lowered the blinds during the closings, have not reopened.

“Our city has completed a V-shaped recovery, as has the rest of China”says Hue Wei, deputy director of the Wuhan Development Office. The recipe for recovery?” An unprecedented government investment and the support of many companies that have come to Wuhan to develop their projects, “he continues.

HELP

Specifically, according to official sources, the Chinese government has injected more than 220,000 million yuan (28,000 million euros) into four recovery funds in the city. In addition, to help the diminished restaurant sector, the most affected, the local authorities implemented a series of measures: cut taxes, reduce rents, and don’t charge water and electricity fees.

In Wuhan, about 300 large state and private companies have expanded their business and offices after confinement. On the list are national tech giants like Alibaba, Tencent, and Xiaomi. China Electronics, one of the largest producers of telecommunications equipment in the Asian giant, established its global headquarters in Wuhan. The American multinational Honeywell was also installed.

In November, the Chinese Ministry of Education said it had launched a job bank in Hubei, the province where Wuhan is located, which was paralyzed for two and a half months, generating more than 500,000 jobs.

If we continue with a few more data: the China Insurance Industry Association assured that it invested 50,000 million yuan (6.37 billion euros) in various projects in Wuhan. In the real estate market, with prices that have fallen, according to data from the sector until December 2020In this city of 11 million inhabitants, 132,468 newly built residences were sold to investors, 61.5% more than the previous year.

REST OF THE COUNTRY

The measures taken at the epicenter of the pandemic can be extrapolated to the rest of the country. The Chinese Communist Party and its banks have revived the economy by starting their locomotive before anyone else, cutting tax burdens to encourage investment and consumption, interest-free loans to small businesses, relief in payments to Security Social by entrepreneurs and reducing the reserve ratios required from financial institutions.

The fact that the pandemic was controlled in almost the entire country in four months has helped to reactivate all sectors. And, above all, to bring China’s GDP to 2.3% growth in 2020, as announced by the National Bureau of Statistics (NBS).

It is true that this is the lowest rise since 1976. But the victory of the second world economy lies in the fact that it is the only one among the large ones that has grown in the year of the pandemic. What the economic data for China also shows is that it has to look for the recipe this year to encourage domestic consumption.

In 2020, according to the NBS, retail sales fell 3.9% year-on-year. Above all, the restaurant sector, with a 16.6% drop in revenue due to closures due to the pandemic.

“We will have good control over the pace, intensity and effectiveness of macroeconomic policies to ensure that the economic recovery remains stable and avoid a political cliff, as small businesses remain in trouble,” Yan said this week. Pengcheng, director of the General Office of the National Development and Reform Commission. Yan added that some temporary and emergency measures implemented during the pandemic, which helped stabilize the economy, cannot last in the long term and that China still needs to achieve growth through reforms and innovation.

Some of those reforms will depend on what the Central Committee of the Chinese Communist Party (CCP) called in its latest Five-Year Plan “dual circulation”, a new form of development that takes the domestic market as its main pillar, while trying to benefit from globalization. It would be an inward economic shift to encourage home consumption, which is the source of 57.8% of the country’s wealth. A new approach that seeks an economy based on self-sufficiency.

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