Coronavirus resurgence in China will be a mere hiccup in the country’s economic recovery

Name: China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years
Uploaded: 2021-01-27T09:15:09.000Z
Duration: 1 min 33 s
Description: China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years

Covid-19 infections and restrictions will slow recovery but consumption will bounce back as the main economic driver

With the rising yuan doing the work of tightening, the central bank can afford to take its time to normalise policy

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A woman and her daughter ride an electric bike during rush hour in Beijing on October 21. China’s economy grew 2.3 per cent last year, but new clusters of Covid-19 cases have raised questions about the outlook for this year. Photo: AFP

Aidan Yao

Aidan Yao is a senior investment strategist for Asia at Amundi, based in Hong Kong.

Published: 5:15pm, 27 Jan 2021Updated: 5:34pm, 27 Jan 2021

With a strong, consensus-beating rebound in the fourth quarter of 2020, China became the only major economy to register an expansion (2.3 per cent) last year.

Industrial production, investment and exports all recorded solid gains. But consumer spending remained the weak spot, with recovery complicated by the resurgence of coronavirus infections and increased public caution ahead of the Lunar New Year.

This could ease pressure on the People’s Bank of China to normalise policy quickly. Yet, such a hiccup does not change the overall outlook of a consumption-driven recovery, and Beijing will scale back policy support this year.

Apart from the impressive pace of recovery, China’s economic growth has become broader in base with a notable pickup in services activity (2.1 per cent) last year complementing the strong industrial sector growth (2.8 per cent) responsible for the initial V-shaped rebound.

Investment continued to do the heavy lifting, with exports also playing a part – a boom in fourth-quarter shipments pushed China’s trade surplus to an all-time high.

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China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years

The strong economic momentum is confirmed by a further acceleration of industrial production growth to 7.3 per cent in December, the highest since March 2019. Manufacturing production continued to lead the recovery, with output of high-end machinery, equipment, electronics and medical products all registering higher monthly growth.