A Year of Continued Revival
China’s economic growth rebounded in 2021 despite challenges
China’s economy experienced a strong rebound in 2021, despite sporadic COVID-19 cases at home and external uncertainty. Its GDP expanded 8.1 percent year on year to 114.37 trillion yuan ($18 trillion) last year, well above the annual target of more than 6 percent, according to the National Bureau of Statistics (NBS) on January 17. Per-capita GDP reached around $12,500, exceeding the global average.
With steady economic recovery and pandemic control in 2021, China was among the fastest growing major economies. It is estimated to account for more than 18 percent of the world economy and contribute some 25 percent to global GDP growth.
The Chinese economy grew 18.3 percent, 7.9 percent, 4.9 percent and 4 percent in the four quarters of 2021, respectively, showing mounting downward pressure. However, the average month-on-month growth in the fourth quarter reached 1.6 percent, as the government’s growth-boosting policies paid off, Wen Bin, chief analyst at China Minsheng Bank, told Chinafrica.
Last year, final consumption contributed 65.4 percent to GDP expansion, and net exports 20.9 percent. NBS head Ning Jizhe told a press conference that expansion of production boosted the improvement of people’s income and drove up household spending. Meanwhile, growing domestic demand and the nation’s complete industrial system were essential to import and export growth. Domestic demand contributed 79.1 percent to economic growth, according to Ning.
In 2021, China created 12.69 million urban jobs, exceeding the annual goal. The surveyed urban unemployment rate stood at 5.1 percent, lower than the 5.5-percent target. According to Ning, new forms of employment spurred job creation. The resumption of sectors such as wholesale and retail also drove up employment.
The government continued its drive toward common prosperity after absolute poverty was alleviated in 2020. According to Ning, steady business and production recovery helped stabilize people’s income.
Benefits of openness
Foreign trade expanded 21.4 percent year on year to 39.1 trillion yuan ($6.1 trillion) in 2021, with exports up 21.2 percent and imports up 21.5 percent, according to the General Administration of Customs of China. It was the first time the volume crossed the $6-trillion mark.
While the pandemic continued to impact global supply chains, exports of medical materials and medicines more than doubled last year, and products related to the stay-at-home economy, such as laptops and home appliances, saw a 13.2-percent year-on-year increase.
“China has effectively controlled the spread of COVID19. As its supply and industrial chains recovered, Chinese enterprises have received more overseas orders,” Xu Hongcai, Deputy Director of the Economic Policy Commission under the China Association of Policy Science, told Chinafrica.
The country remained a magnet for investment. Paid-in foreign direct investment (FDI) expanded 14.9 percent year on year to a record high of 1.14 trillion yuan ($181 billion). FDI inflow into the service sector increased 16.7 percent year on year to 906.49 billion yuan ($142.79 billion), the Ministry of Commerce said.
Robust activity
In 2021, industrial production further resumed its growth momentum. Value-added industrial output, a major economic indicator, went up 9.6 percent year on year. Net profits of state-owned enterprises rose 29.8 percent year on year to 1.8 trillion yuan ($283.56 billion).
By the end of last year, the number of Chinese businesses exceeded 150 million, of which more than 100 million were self-employed individuals. The government provided support for small and medium-sized enterprises (SMES) amid rising prices of production materials, mainly by reducing taxes and fees, and cutting financing costs. In the fourth quarter, small and micro enterprises benefiting from tax reduction policies accounted for 62.3 percent of the total. The Beijing Stock Exchange began trading last November, providing targeted support for innovation-driven SMES.
New driving forces played a greater role. Last year, expenditure on research and development grew 14.2 percent year on year, 4 percentage points higher than the 2021 level. The value added of the hi-tech manufacturing industry expanded 18.2 percent year on year. The output of new-energy vehicles soared 145.6 percent over 2021.
The service industry saw its value added exceed 60 trillion yuan ($9.4 trillion), up 8.2 percent year on year. It accounted for 53.3 percent of the country’s GDP, contributing 54.9 percent to overall economic growth.
Demand recovery
Retail sales of consumer goods, a major indicator of consumption growth, hit 44.08 trillion yuan ($6.93 trillion) in 2021, up 12.5 percent year on year. Online retail sales topped 13 trillion yuan ($2 trillion) with a 14.1-percent year-on-year growth. “It is a milestone to top 44 trillion yuan ($6.9 trillion),” Ning said.
Resuming production ensured supplies of daily necessities. “While the U.S. saw its inflation reach a 40-year high last November, China’s consumer price index grew only 0.9 percent year on year in 2021,” Xu said.
Per-capita spending grew 13.6 percent year on year. Specifically, it expanded 27.9 percent on education, culture and entertainment and 14.8 percent on healthcare.
Last year, fixed assets investment nationwide went up 4.9 percent year on year to over 54.45 trillion yuan ($8.56 trillion). According to the NBS, mounting costs of raw materials, coupled with the impacts of the pandemic and floods in several provinces, led to slow investment growth in the first three quarters.
“However, investment in the manufacturing industry driven by external demands achieved a 13.5-percent year-on-year growth, hitting its highest point since 2015,” Wen said. The hi-tech industry also saw 17.1-percent year-on-year investment growth.
According to Ning, improving innovation-related expenditure will drive investment in the manufacturing industry, while investment in infrastructure will further climb this year.
Future outlook
China’s economic growth in 2022 still faces challenges. In an article published by Caixin Media, Lu Ting, Chief China Economist with securities firm Nomura, suggested an annual growth target of around 5 percent, saying export growth is expected to weaken and the impacts of the pandemic will linger. As many countries ease their pandemic containment measures, consumption in those countries will shift from goods to services. Major economies may decrease financial stimulus, and emerging countries’ production is likely to recover. All of these changes have the potential to inflict downward pressure on China’s exports.
At the Central Economic Work Conference in December 2021, the government pledged that, with these expectations, it would implement proactive fiscal policies and prudent monetary policies, highlighting stability as the priority for 2022.
Ning stressed that the recovery of domestic and external demand will further back up economic growth this year. The boom of the hi-tech and service sectors, low-carbon transformation, opening-up efforts and improvement of income distribution will add momentum to high-quality economic development.