China’s Economic Recovery To Extend Into 2021

The World Bank forecasts the global economy to expand by 4 percent, with China’s economy expected to grow by 7.9 percent in 2021, nearly double the expected global growth. The contraction in 2020 was less severe than previously projected due to China’s swift recovery, which was demonstrated through its resumption of production and exports leading to a GDP growth of 4.9 percent and 3.2 percent in the second and third quarters of 2020 respectively.

With COVID-19 vaccine rollouts and a subsequent focus on recovery strategies, countries are expected to return to the path of growth gradually in 2021.

Key Economic Indicators

China’s Consumer Price Index (CPI) increased by 0.2 percent year on year in December 2020, recovering from a decline in the previous month. This increase was caused by rising food prices, particularly pork and egg prices. The Producer Price Index (PPI) continued a downward trend, dropping by 0.4 percent year on year following improved domestic demand and a surge in the prices of raw materials.

Strong PMI in China

China’s Producer’s Manufacturing Index (PMI) reached 51.9 in December 2020, registering a 3.39 percent year-on-year increase. However, it fell marginally from November levels by 0.2 percentage points as a result of tighter COVID-19 measures among China’s trading partners as well as seasonal factors in China, including power blackouts across the country, causing a reduction in production activity.

FM on Five-nation Africa Visit

Foreign Minister of China, Wang Yi, embarked on a five-nation tour to Africa, visiting Nigeria, the Democratic Republic of the Congo, Botswana, Tanzania and Seychelles from January 4 to 9. This was the foreign minister’s first foreign trip of 2021, reaffirming the high regard with which China holds relations with Africa. Some of the key points of discussion during the visit were economic recovery in the aftermath of the pandemic, joint efforts to fight COVID-19, as well as efforts on furthering the Belt and Road Initiative. In addition, the 8th Ministerial Conference of the Forum on China-africa Cooperation, which will be held in Dakar, Senegal this year, was discussed. CA

Rural E-commerce Growth

E-commerce has helped bump up the income of Chinese farmers, contributing to the country’s efforts on rural vitalization, the Ministry of Agriculture and Rural Affairs said on January 13.

In 2019, rural online retail sales stood at about $61.9 billion, said ministry official Zeng Yande at a press conference.

“Quite a few farmers in China have turned to short videos or livestreaming to sell their homegrown produce, and they managed to get high prices,” Zeng said.

Conditions for rural e-commerce development, including communication facilities and logistics, have witnessed continued improvements in recent years, with 4G network coverage for 98 percent of villages in the country, according to the ministry.

Record-breaking Foreign Trade

China’s total goods imports and exports expanded 1.9 percent year on year to about $5 trillion in 2020, hitting a record high despite a worldwide slump in shipments, official data showed on January 14.

Exports rose 4 percent, while imports went down 0.7 percent, according to the General Administration of Customs (GAC). In

December alone, exports surged by 10.9 percent year on year in yuan terms.

China emerged from the global economic and trade challenges in 2020 as the world’s only major economy to have registered positive growth in foreign trade in goods, GAC spokesperson Li Kuiwen told a news conference.

During the first 10 months of last year, the country’s foreign trade and exports accounted for 12.8 percent and 14.2 percent of the world’s total, respectively, both reaching historic highs, Li said.

Fiscal Policy Efficiency

China will improve the efficiency and quality of its fiscal policies. It will do so by optimizing expenditure structures and strengthening management, Chinese Finance Minister Liu Kun said.

The government will normalize its implementation of the specified transfer payment mechanism to raise fiscal spending efficiency while “tightening the belt” to save money and enrich the people, said Liu.

“We will increase the fiscal funds directly channeled to the prefecture and county-level governments, and expand the scope of the coverage,” Liu said, adding that the government will also beef up supervision during the process.

By the end of December 29, 2020, a total of $234.71 billion of fiscal funds went through the specified transfer payment mechanism.

Robust SME Recovery

China’s small and medium-sized enterprises (SMES) registered stable recovery in the fourth quarter of 2020 (Q4) as the country’s economy demonstrated strong resilience and vitality, according to the National Development and Reform Commission (NDRC).

In Q4, the Small and Medium Enterprises Development Index, based on a survey of 3,000 SMES, went up 0.2 points from Q3 to 87. The reading scored a three-quarter streak of expansion and hit a new high since Q1 2020, the NDRC data showed.

The index contains multiple sub-indexes to gauge the performance and expectations of SMES. A reading below 100 indicates dented vitality.

Cross-border RMB Policies

China will further optimize cross-border Renminbi (RMB) policies and stabilize foreign trade and investment, according to a circular posted on the website of the People’s Bank of China, the country’s central bank.

China will promote the facilitation of RMB settlement, simplify the cross-border RMB settlement process, optimize the management of cross-border RMB investment and financing, and facilitate overseas institutions’ use of RMB settlement accounts, said the circular.

The circular will come into effect on February 4. The bank said it will strengthen instructions to commercial banks in China and continue improving cross-border RMB policies to ensure that cross-border settlement in the currency could serve the country’s real economy and facilitate trade and investment. CA

$61.9 billion China’s rural online retail sales in 2019