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Investment strategy
October 21, 2020
2 mins

East vs West: A contrast in COVID costs and economic outcomes

October 21, 2020
2 mins
David Bailin
Chief Investment Officer
Steven Wieting
CHIEF INVESTMENT STRATEGIST AND CHIEF ECONOMIST
Bridge with autumnal trees on either side
SUMMARY

China's recovery from the pandemic will show the West the way forward. Investors need to reflect this in their portfolios.


The difference in the cost of COVID between the West and East is dramatic and visible. A surge in US deficit spending -- from 5% of GDP to 15% in 2020 -- has been required to achieve economic stability thus far. China has not needed to provide as much fiscal and credit support given its handling of COVID.

In 2020, China's shutdown, reopening and economic results provide useful  forward guidance on patterns for later recoveries in Western economies. For example, Hong Kong and Singapore have resumed flights in a safety bubble. This illustrates a positive future path for beaten-down services industries across the world by mid- to late 2021.

China will derive certain advantages from its handling of the pandemic.That said, China has its own set of headwinds. We think that exposure to Asian growth and equities is an essential part of a forward-thinking portfolio. Structural changes in how the East and West compete will make the development and deployment of that portfolio complex, but beneficial or investors.

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