Editor's note: Alessandro Golombiewski Teixeira is a National Thousand Talent Distinguished Professor of Public Policy at the School of Public Policy and Management, Tsinghua University, and a professor of International Business at Schwarzman College in Tsinghua. He is a former special economic adviser to the president of Brazil and former minister of tourism, and minister of development, industry and foreign trade of Brazil. He was also president of the World Investment Association – WAIPA. The article reflects the author's views, not necessarily those of CGTN.

A new report by the IMF has highlighted the varying impact of the COVID-19 pandemic around the world on economic performance. Nowhere is this more apparent than in the diverging economies of China and the U.S., where China's GDP growth has now far exceeded U.S. levels.

Gradual recovery or continued stagnation?

Seven months since the World Health Organization (WHO) declared COVID-19 a pandemic, countries around the world are finding themselves at one of two ends the spectrum in dealing with the pandemic. At one end, countries are still wrangling with the worst of the virus with seemingly no end in sight. On the other, countries have largely eliminated new cases and are already leaping ahead with their economic recovery programs.

Taking into account the millions of businesses that make up each country's economy – either forced shut, or operating in full swing – the cumulative impact of the virus on the entire economy is colossal. The International Monetary Fund (IMF) forecasts world GDP to shrink 4.4 percent this year, an improvement from the 4.9 percent drop seen in June, according to the latest World Economic Outlook released this month.

Economic performance continues to be held back by hard-hit small-medium enterprises (SME). The last few months have sealed the fate of these companies, with 11 percent of SMEs in Europe expecting to file for bankruptcy within six months, according to a survey by McKinsey.

As this process continues into 2021, the gap between economies that have swiftly and efficiently brought the virus under control, compared to those who can't stamp it out continues to widen.

Illustrating this divide is the airline industry, which in the U.S. faces a 40.4 percent decline in capacity. In China, however, airlines are expected to recover 90 percent of its prior capacity levels by the end of 2020.

The key message the IMF report points out is the lasting impact of the coronavirus pandemic to the distribution of global economic growth. Unsurprisingly, therefore, the five nations with the highest COVID-19 death counts – U.S., Brazil, India, Mexico and UK – are predicted to suffer a total GDP decline of nearly $1.8 trillion.

Steering China's economy out of the storm

Global output in all countries is projected to remain below 2019 levels even next year – except China, where output is expected to exceed 2019 levels this year.

China's remarkable economic rebound can be attributed to Beijing's highly effective response to the pandemic, accompanied by a package of measures to stimulate economic recovery. As a result, China will account for more than a quarter of global growth and will grow by 8.2 percent next year, according to the IMF estimates.

Further Bloomberg calculations based on the IMF data showed that the proportion of worldwide growth coming from China was expected to increase from 26.8 percent in 2021 to 27.7 percent in 2025 – more than 15 and 17 percentage points, respectively, higher than the U.S. share of expected global output.

Economic recovery by design

From a macroeconomic perspective, China's approach to dealing with the worst of the economic fallout has generated substantial results.

In May, Beijing commenced a 3.6 trillion yuan ($500 billion) fiscal stimulus aimed at boosting investment. This has helped China's economic recovery, beating economists' expectations in the second quarter with a growth of 3.2 percent.

While the stimulus package was largely investment-orientated with limited support for households, other policies have centered on unleashing domestic consumption.

The "dual circulation" policy aims to shift the Chinese economy towards "internal circulation" – domestic production, distribution and consumption. By helping rebalance growth towards domestic demand, the policy responds to the potential vulnerability of China's export-led model, a prolonged trade war, as well as falling global trade due to the pandemic.

China's new infrastructure projects are another more long-term strategy to accelerate its domestic economy ahead of other nations. The projects incorporate next-generation information networks and an expansion of 5G applications aiming to stimulate new consumption demand and boost industrial upgrading.

In the U.S., meanwhile, rising COVID-19 cases loom over any efforts to begin economic recovery. Negotiations for a new stimulus package have stalled as Democrats and the White House struggle to reach consensus to boost the economy before the election.

It is clear by now that the longer it takes for countries to bring the pandemic under control, the worse the damage to the economy and therefore the longer the recovery will take. Unless new cases in the U.S. fall significantly in the upcoming months, the already stark difference between the trajectories of the U.S.'s and China's economies will likely only increase. Ultimately, there is no one that the current American administration can blame but themselves.

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