Asia’s growth will continue to depend on China even as it focuses on domestic economy, experts say

SINGAPORE – China might be looking more toward its domestic economy now, but its growth will continue to be crucial for the Asian region, analysts told CNBC.

Calling its latest GDP print “stunning” when the rest of the world is in a “dire” recession due to the pandemic, Cornell University’s Eswar Prasad said: “I think China is going to remain important for demand in the Asian region.”

“And ultimately given the size of its economy, Asia cannot prosper unless China prospers,” the professor told CNBC on Monday, in response to a question on what China’s economic recovery means for Asia when the world’s second-largest economy is focusing on its domestic growth.

China reported that its third-quarter GDP growth was up 4.9% from a year ago — lower than the 5.2% that economists expected. Still, the country is the first to bounce back after getting over the worst of the coronavirus pandemic. The International Monetary Fund expects China will be the only major world economy to grow this year, at 1.9%.

“That China was able to grow as fast as it did given the weakness all across the rest of the global economy right now, is quite remarkable,” said Steve Cochrane, chief APAC economist at Moody’s Analytics.

Going forward, however, China needs to focus on its small and medium enterprises which will be important for its growth, the analysts say.

“For China to prosper in a durable way, I think one of the key issues really is going to be not just pumping … credit, but getting credit into the hands of the small and medium enterprises, the more dynamic parts of the economy that can generate better employment growth, as well as productivity growth because ultimately, that is crucial for China’s growth that matters a great deal for economies in the region as well,” Prasad said.

Cochrane agreed, saying: “Any kind of future stimulus has to be focused more on small and medium sized enterprises. They are the dynamic part of the economy, and the part that can really work to continue to grow and diversify the economy.”

— CNBC’s Evelyn Cheng contributed to this report.