China GDP grows 2.3% in ’20 despite virus-led disruptions
China’s economy roared back to pre-pandemic growth rates in the fourth quarter as its industrial engines fired up to meet surging demand for exports, pushing the full-year expansion beyond estimates and propelling its global advance.
Gross domestic product climbed 6.5% in the final quarter from a year earlier, pushing growth to 2.3% for the full year. That leaves the world’s secondlargest economy driving global growth and potentially passing US GDP sooner than previously expected.
The V-shaped recovery from the biggest slump on record was engineered by getting Covid-19 under control and deploying fiscal and monetary stimulus to boost investment. Growth accelerated as the nation’s factories revved up to meet demand for medical equipment and workfrom-home devices in an export bonanza that saw it ship 224 billion masks from March through December—almost 40 for every man, woman and child on the planet outside of China.
While the revival makes China the only major global economy to have expanded last year, it didn’t come without cost as long-term imbalances worsened. Consumption lagged industry as workers tightened their belts and income inequalities widened, as they have elsewhere around the world.
“There’s a huge discrepancy between production and consumption,” said Bo Zhuang, chief China economist at TS Lombard. “I am not very optimistic about domestic demand, as wage growth is not back to pre-pandemic levels.”
The stimulus to support the economy through the pandemic has been accompanied by a surge in debt which authorities are now seeking to curb as the recovery takes hold. At a December meeting to lay out economic goals for 2021, the ruling Communist Party signalled that stimulus would be gradually withdrawn, although it would avoid any “sharp turns” in policy.
The Chinext Index of small caps closed 1.9% higher, while the yield on the most actively traded contract of 10-year government bonds rose 3 basis points as of 4:12 pm in Shanghai to 3.17%, set for the highest in two weeks. The onshore yuan weakened 0.07% to 6.4864 per dollar as the greenback rebounded.
Emerging from the pandemic larger than when it started is a capstone to a dramatic year for the world’s second-largest economy, which began 2020 with a historic first- quarter slump when the coronavirus lockdowns brought most activity to a halt.