China is seeing a ‘V-shaped recovery,’ but don’t expect that to be the global norm, analyst warns

CNBC reports that China is seeing a strong economic rebound following a slump spurred by the lockdown to curb the coronavirus’ spread, but don’t count on that being the case for other major economies around the world, says IMA Asia’s Richard Martin.

“That’s a V-shaped recovery you see in the (Purchasing Manager’s Index), down sharply in February, back up in March, still strong in April, back up a little above 50 in May,” Martin, who is managing director at the firm, told CNBC’s “Street Signs” on Monday.

Martin’s comments came after recent data showed China’s manufacturing sector expanding in May.

Among other markets in Asia, Martin said Vietnam and Taiwan could pull off a similar economic recovery.

Elsewhere, however, he warned that everyone “goes down and stays down for two or three months before they come back up.”

“That will be the story we see in Europe and the United States, and people still haven’t adjusted to that,” Martin said. “They think once Covid-19 dies down, that’s the end of the game. But it’s not.”

At present, Martin said the world is currently undergoing a “transition” toward a “new normal.” 

“We will see cities, we will see states and provinces and even national governments switch lockdown on and off as they get worried about second waves of virus infection,” Martin said. “We’ll also see a lot of deflation. Not enough demand for goods and massive restructuring in some core industries.”

Citing his discussions with large multinational companies, he said the firms have talked about the third quarter being a period where they will “start rationalizing their operations and letting staff go.”

“The Covid-19 wave, the first wave dies down, but we now have two or three economic waves: Unemployment, bankruptcy, default, which are gonna build through the end of the year,” Martin said.