CHINA ENDED 2020 IN GOOD SHAPE
Only major economy to avoid contraction
Gross domestic product grew 2.3% in 2020, official data showed yesterday.
BEIJING: China’s economy picked up speed in the fourth quarter, with growth beating expectations as it ended a rough coronavirus-striken 2020 in remarkably good shape and remained poised to expand further this year even as the global pandemic rages unabated.
Gross domestic product grew 2.3% in 2020, official data showed yesterday, making China the only major economy in the world to avoid a contraction last year as many nations struggled to contain the Covid-19 pandemic.
And China is expected to continue to power ahead of its peers this year, with GDP set to expand at the fastest pace in a decade at 8.4%, according to a Reuters poll.
The world’s second-largest economy has surprised many with the speed of its recovery from the coronavirus jolt, especially as policymakers have also had to navigate tense US-China relations on trade and other fronts.
Beijing’s strict virus curbs enabled it to largely contain the Covid-19 outbreak much quicker than most countries, while government-led policy stimulus and local manufacturers stepping up production to supply goods to many countries crippled by the pandemic have also helped fire up momentum.
GDP expanded 6.5% year-on-year in the fourth quarter, data from the National Bureau of Statistics showed, quicker than the 6.1% forecast by economists in a Reuters poll, and followed the third quarter’s solid 4.9% growth.
“The higher-than-expected GDP number indicates that growth has stepped into the expansionary zone, although some sectors remain in recovery,” said Xing Zhaopeng, economist at ANZ in Shanghai. “Policy exiting will pose counter-cyclical pressures on 2021 growth.”
Backed by the strict virus containment measures and policy stimulus, the economy has recovered steadily from a steep 6.8% slump in the first three months of 2020, when an outbreak of Covid-19 in the central city of Wuhan turned into a full-blown epidemic.
Yet, underscoring the massive Covid19 impact worldwide, China’s 2020 GDP growth marked its weakest pace since 1976, the final year of the decadelong Cultural Revolution that wrecked the economy.
Ning Jizhe, head of China’s statistics bureau, told a briefing that there would be many favourable conditions to sustain China’s economic recovery in 2021, citing the country’s large market and resilient supply chains.
This year marks the start of China’s 14th five-year plan, which policymakers see as vital for steering the economy past the so-called “middle income trap”.
China still faces many challenges, not least the tensions between Beijing and Washington and how they would play out under the new US administration led by President-elect Joe Biden. As well, rising labour costs, the ageing population, and a recent spike in credit defaults add to risks for an economy that is still trying to reduce a mountain of debt.
“We should be alert to the following problems in 2021: first the imbalance of economic recovery. Compared with investment and export, consumption is weak as a whole and has yet to return to normal levels,” said Wang Jun, Beijing-based chief economist at Zhongyuan Bank.
“The second problem is a possible rapid slowdown in credit growth,’’ he said.
While this year’s predicted growth rate of over 8% would be the strongest in a decade, led by an expected doubledigit expansion in the first quarter, it is rendered less impressive coming off the low base set in pandemic-stricken 2020.
Some analysts also cautioned that a recent rebound in Covid-19 cases in the northeast of the country could impact activity and consumption in the run-up to next month’s long Lunar New Year holidays.
“Control of people flows has started, so the risk of a widespread outbreak of Covid should be small,” said Iris Pang, ING’s chief China economist. “But the risk of a technology war between China and some economies remains if the US does not remove some measures.”