China’s Post-Covid Economic Resurgence: Implications for the United States and Beyond

By Preserve Gold Research

Today, nearly half a year after China’s policymakers began lifting the restrictions put in place to curb the spread of the coronavirus, its economy is showing signs of strong recovery. China’s economy surpassed expectations in the first quarter of the year, as gross domestic product (GDP) grew by 4.5% compared to the same period last year.

The speed of the recovery has exceeded even our relatively upbeat expectations,” said Julian Evans-Pritchard, head of China economics research at Capital Economics. “With consumer confidence on the mend and credit growth accelerating, there is still scope for a further pickup in activity over the coming months,” he added.

In stark contrast to China’s resurgent economy, the United States experienced a notable slowdown in its annualized GDP growth during the first quarter. The growth rate dipped to a modest 1.1%, marking a significant decrease from the 2.6% growth observed in the fourth quarter of 2022. This disparity underscores the differing economic trajectories between the two nations, with China seemingly on the cusp of a robust recovery while the US struggles to regain traction.

China’s abandonment of its zero-COVID policy has further cemented its reputation as a global economic leader, prompting analysts to weigh the implications for other countries. These include a potential divergence in terms of economic performance and evidence of China’s growing influence in international markets, particularly as its domestic economic momentum continues to outpace that of the United States’.

Looking ahead, China’s post-pandemic economic resurgence could have a profound impact on the global economy. The world’s second-largest economy is already the largest exporter of goods and services, and its continued resurgence could shape a new global economic order. Chinese businesses are expected to benefit from increased demand for their goods and services, while countries that rely on the import of Chinese goods could see their costs rise.

For the US, the implications of China’s resurgence are particularly salient. A continued outflow of investments from the US to Chinese markets could drive up the cost of imports and lead to higher inflation, according to experts. With the US economy already facing sluggish growth, this could further depress US GDP growth and hamper recovery efforts. At the same time, the growing economic power of China could lead to increased competition and a shift in the geopolitical balance of power.

With a growing consensus in Washington that China poses “the single greatest threat to America’s global standing,” the U.S. may find itself at an increasing disadvantage as China’s economy continues to rebound.

Is Higher Inflation on the Horizon?


The swift reopening of the world’s second-largest economy has led to an uptick in consumer spending, with the Chinese public eager to resume their pre-pandemic lifestyles. While the resurgence of consumer demand has been a boon to the Chinese economy, analysts say it could lead to higher inflation in the US and elsewhere. For the U.S. Federal Reserve, the prospect of higher inflation could pose a challenge, as its already limited room to maneuver tightens further.

Economists forecast that the resurgent demand for commodities in China may drive up prices by as much as 0.65%, which could lead to pass-through effects on global markets. Demand for oil alone is expected to increase by at least 2% but could reach as high as 7.5%, according to estimates from Oxford Economics. “As consumers are allowed out of their apartments, and start becoming more mobile, there’s going to be more gasoline demand and more jet fuel demand,” said Tavis McCourt, institutional equity strategist at Raymond James. As the largest importer of oil, economists expect the surge in demand to push up the cost of oil by as much as $20 per barrel given the already tight supply-demand balance.

Prices for copper, aluminum, and other industrial metals already experienced their sharpest monthly gain in over 10 years in January, with prices expected to continue their upward momentum in the months ahead, according to analysts. Meanwhile, demand for agricultural commodities such as wheat, corn, and soybeans has also been on the rise due to increased consumption in the country. As Chinese consumers resume their spending habits and demand returns to pre-pandemic levels, it “puts the progress [the US has] seen on inflation in a much more tenuous position,” said McCourt.

With the threat of higher inflation looming, the US Federal Reserve may be forced to rethink its current policy stance. Although the Fed has suggested that it may not need to raise interest rates as much as it originally expected, the threat of higher inflation could push the Fed towards a more hawkish stance according to some analysts. Given the self-fulfilling nature of inflation expectations, a perception that the Fed is unwilling to raise interest rates could in turn lead to higher inflation. And with cracks in the foundation of the US economy already beginning to show, higher interest rates could be the final nail in the coffin for an already fragile recovery.

Tensions Mount on the Global Stage Amid China’s Economic Resurgence


The growing economic might of China has become increasingly apparent in recent months, prompting a shift in the geopolitical balance of power. China’s growing influence, both economically and politically, has been met with concern by many countries, particularly the United States.

China is not an ally or strategic partner,” said Patrick McHenry, R-N.C, in a hearing of the Congress on combating the economic threat from China. “We should reject policies that allow China to ignore debt transparency and multilateral standards with impunity or allow them to exert a malign influence in the international financial institutions,” he added. Inflamed by a long-standing trade war, tensions between the US and China have reached fever pitch in recent months. Although trade between the two countries hit a record high last year, relations remain strained, with both countries taking measures to curb the influence of the other.

Stoking the fire further, May witnessed the convergence of two distinct summits, with the Group of Seven (G7) and the China-Central Asia summits taking place on the same day. The dual summits highlighted the divergent paths taken by the two powerhouses and raised questions about how other countries should respond. G7 leaders adopted a communique expressing concerns about China’s “economic coercion” and “weaponisation of economic vulnerabilities.” At the same time, Chinese President Xi Jinping sought to counter U.S. influence in the region by facilitating stronger economic ties between China and its Central Asian neighbors.

The two summits effectively laid out competing visions for the future of global politics and economics. But with China’s economy on the rebound, it looks poised to become an even more formidable force on the world stage. As China continues to strengthen its economic influence, there is a growing consensus in the international community that the world is entering a new era of geopolitics, one characterized by fierce competition and power struggles between the US and China. According to U.K. Prime Minister Boris Johnson, China poses “the greatest challenge of our age,” in terms of global governance and prosperity.

With China’s economy on the upswing and tensions between Washington and Beijing escalating, it seems that the US may be outpaced in the race for economic influence. The implications of a world in which China stands toe to toe with the US are far-reaching, and the consequences remain to be seen. But for now, it’s clear that the US must prepare to face an increasingly formidable adversary in the global arena.

Opportunities Abound Amid China’s Resurgence


Despite the growing rift between the US and China and the rising threat of inflation, analysts say the reemergence of the Chinese economy could present a golden opportunity. As Napoleon Hill famously said, “Within every adversity is an equal or greater benefit. Within every problem is an opportunity.”

Though the Chinese economy is still subject to a great deal of uncertainty, some analysts are optimistic that the resurgence of the Chinese economic engine could send commodity prices higher—among them, precious metals. Gold prices surged to a two-year high in May, breaching the $2,000 per ounce threshold for the first time since August 2020. Silver, too, saw a jump in prices, with its gains outpacing gold’s during the first quarter of the year. As China’s economy continues to strengthen, industry experts are eyeing a further uptick in the prices for these commodities, which could present a lucrative opportunity for investors.

Though geopolitical tensions remain high, the revival of the Chinese economy suggests that opportunities abound for those seeking to take advantage of the current environment. As the country continues to rise from its pandemic slump, precious metals may be one of the few bright spots in an otherwise gloomy economic landscape.

Are you prepared for China’s economic revival and potential global implications?

Call (877) 444-0923 to speak with a Gold and Silver specialist today.

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