China’s Economy May Expand by 9% in 2021
BEIJING (Dispatches) - China’s economic growth could reach as high as 9 per cent next year, and its rapid rebound from the coronavirus pandemic may help the economy overtake the US to become the world’s largest later this decade, analysts said.
But Beijing is likely to roll back some of its stimulus measures used to offset the coronavirus damage amid concerns over its record-high debt level, they added.
Expectations over China’s economic outlook have turned bullish in recent weeks, with the world’s second-largest economy leading the global recovery from the impact of the coronavirus with its robust export growth, strong government spending and a low infection rate.
Given China’s rapid rebound, the Centre for Economics and Business Research, a UK think tank, predicted last week that China will overtake the United States to become the world’s biggest economy in 2028, five years earlier than previously estimated.
In contrast, many other countries have been forced to resume lockdown measures to control the spread of the coronavirus.
China’s recovery has seen a number of brokers, including Nomura and China International Capital Corporation (CICC), predict its gross domestic product (GDP) growth for 2021 will be 9 per cent.
However, the Chinese Academy of Social Sciences (CASS), a Beijing-based think affiliated with the State Council, cautioned that weak consumption, unemployment and the ongoing struggle among small to medium-sized companies are likely to be major obstacles to growth going forward.
“Even though China’s exports remain resilient this year, it could face problems from poor global economic outlook and shrinking international trade,” CASS said in its 2021 China economy forecast. “Debt growth and high interest rates are also a risky combination, adding to China’s overall debt pressure. The situation of fiscal expenditure not being matched by fiscal revenue is becoming worse, and the proactive fiscal policy is looking tired.”
China’s economy grew by a recently revised rate of 6.0 per cent in 2019 – the lowest growth rate since political turmoil ravaged the country in 1990 – and then contracted by 6.8 per cent in the first quarter of 2020 after the coronavirus shut down large swathes of the country.
It was, however, the first major economy to show a recovery, with growth rates of 3.2 per cent in the second quarter and 4.9 per cent in the third.
China is now expected to be the only Group of 20 nation to show a positive economic growth rate in 2020, predicted to be 1.9 per cent by the International Monetary Fund (IMF) and 2.0 per cent by the World Bank.
Its growth rate is expected to increase sharply in 2021 due to both the continued strong recovery and the low 2020 base for comparison. The IMF then expects China’s GDP growth to be 8.2 per cent next year, while the Organization for Economic Co-operation and Development (OECD) places it at 8 per cent. The World Bank and CASS each project a slightly lower growth rate of 7.8 per cent.
In its latest global outlook, Standard Chartered Bank projects China’s GDP growth to accelerate to 8 per cent in 2021, adding that year-on-year growth may surge to 18 per cent in the first quarter due largely to the low base following the historic contraction earlier this year, rather than real economic activity.