Invesco says China’s economic rebound from the coronavirus will lift surrounding economies in Asia

China’s economy has shown signs of a strong rebound from the coronavirus pandemic. Invesco believes that this could greatly benefit neighboring economies in Asia.

China’s recovery from the coronavirus pandemic has been a fast one as it helped boost a large stock market rally this summer. In July, the Shanghai Composite index soared nearly 17%. The benchmark is up 5.5% on a year to date basis. As the country’s economy continues to rebound, more gains are likely to come.

“China’s economic recovery will lift surrounding Asian economies to a certain extent,” said David Chao, global market strategist for the Asia Pacific at Invesco. He added that the is positive that the Chinese market “will have much more impact… on boosting other Asian economies.” Although, the extent of the recovery is not certain compared to the 2010 economic decline when China’s fiscal stimulus boosted other Asian economies.

The Chinese economy saw unexpected growth as it emerged from the coronavirus pandemic lockdown. In addition, all the country’s stimulus measures worked fine, with increased manufacturing activities in factories and evident growth in industrial production data.

The strategist made his comments after a recent data showing China’s manufacturing activity was published in September. The data showed an expansion in manufacturing activities which indicated progressive recovery for China’s economy, also the world’s second-largest economy. In August, China reported its first profitable retail sales for the year.

“I continue to expect Chinese equities to outperform developed market equities because China has been showing a continued V-shaped rebound, you know, from coronavirus,” Chao said.

A research note from Deutsche Bank also said China’s V-shaped rebound was “largely completed”, though, consumer spending was still below pre-COVID levels.

U.S.-China tensions

Chao also cited the U.S.- China tech tensions, which are currently taking a “backseat” due to President Trump’s coronavirus diagnosis. He said he had expected the issue of the tension between both nations to surface in the first presidential debate between President Trump and Democratic presidential nominee Joe Biden.

“We haven’t seen Trump come out yet to target, you know… China for his personal battle against COVID but I think that that is a possible narrative that could be spun especially if he gets better within the next few weeks and returns to the campaign trail,” said Chao.

Throughout his term as president, Trump has been known for his vocal criticism of Beijing on several issues surrounding trade and the coronavirus outbreak which started from China. There have also been tech tensions between the United States and China over national security concerns and Chinese companies owning U.S. tech firms.