China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years
China GDP: economy ends coronavirus-ravaged year with strong growth surge
- China’s economy grew by 2.3 per cent in 2020, the lowest growth rate since 1976, but it is likely to be the only major economy to have expanded last year
- Rapid acceleration at the end of the year means the economy was growing more strongly than it was before the coronavirus pandemic hit at the end of 2019
China’s economy grew by 2.3 per cent in 2020, in a dramatic turnaround since the coronavirus pandemic ravaged the country in the early part of the year, according to new figures released on Monday.
The annual growth rate was the lowest since the Chinese economy shrank by 1.6 per cent at the end of the Cultural Revolution in 1976.
But it comes as other countries struggle to contain the effects of the pandemic, with China expected to be the only major economy to have expanded in 2020.
The dramatic rebound was highlighted by a significant acceleration over the last three months of 2020, when China’s economy grew by 6.5 per cent from a year earlier, ahead of analysts’ forecasts of 6.2 per cent growth, the National Bureau of Statistics (NBS) announced on Monday.
This meant that quarterly growth was higher than the 6.0 per cent reported in the fourth quarter of 2019, before the effects of the virus took hold. It was also a remarkable shift from the first quarter of 2020, when the economy suffered a dramatic collapse, shrinking by 6.8 per cent, in the first quarterly shrinkage since records began.
Ning Jizhe, the head of the NBS, said that “the main targets of economic and social development [in 2020] have been completed better than expected”.
“China is expected to become the only one major economy in the world to achieve positive economic growth throughout the year,” said Ning, adding that quarterly GDP growth “have returned to the normal level”.
That the size of the Chinese economy also topped 100 trillion yuan (US$15.4 trillion) for the first time last year, marked another symbolic win for the Chinese Communist Party.
“The GDP data shows the economy has almost normalised,” said Yue Su, principal economist at the Economist Intelligence Unit in Beijing. “This momentum will continue, although the current Covid-19 outbreak in a couple of provinces in northern China might temporarily cause fluctuation.”
Nonetheless, the nature of the recovery has been distinctly lopsided, as demonstrated by various NBS data points on Monday. Since factories began reopening in China following the historic shutdown over the Lunar New Year, the industrial prong of China’s economy vastly outgrew consumption, with exports helping power growth, even as imports struggled to gain momentum.
Industrial production, which gauges China’s output in manufacturing, mining and utilities, grew by 2.8 per cent last year, down from 5.7 per cent in 2019.
Compare this to retail sales, a key indicator of consumer spending in the world’s most populous nation, which contracted by 3.9 per cent last year, down from 8.0 per cent growth in 2019. In December 2020, retail sales disappointed again, with 4.6 per cent growth from a year earlier, missing analysts’ forecasts of 5.5 per cent growth.
The slowing of pace of consumption again raises questions about the outlook for consumer spending amid the impact of one of the worst coronavirus outbreaks since the spring last year on consumption during the upcoming Lunar New Year festival.
“Following new government restrictions amid Covid-19 outbreaks in two provinces, reduced confidence and travel during the Chinese New Year holidays in February could hamper first quarter growth. But, at least for now, we think the risk of major economic impact is low, given China’s track record of containing outbreaks,” said Louis Kuijs, Asia Pacific analyst at Oxford Economics.
Beijing set a target of creating 9 million new urban jobs in 2020, compared with 11 million in 2019. Monday’s data release said that there were 11.86 million new urban jobs created in China last year, 131.8 per cent of the target. For the whole of 2020, China’s surveyed jobless rate was 5.6 per cent compared with a target of around 6 per cent.
The statistics bureau also released economic data covering the final month of 2020 on Monday, showing that growth remained relatively strong, even as some engines eased off.
Retail sales grew by 4.6 per cent last month compared to December 2019, well below analysts’ forecasts for a gain of 5.5 per cent. Nonetheless, this still marked the fifth successive month of expansion with retail sales having grown by 5.0 per cent in November.
Fixed asset investment grew by 2.32 per cent in December, while for the whole year of 2020 it expanded by 2.9 per cent compared to 5.4 per cent in 2019.
“We think the outlook remains bright in the near-term. Despite the latest dip in retail sales, we see plenty of upside to consumption as households run down the excess savings they accumulated last year. Meanwhile, the tailwinds from last year’s stimulus should keep industry and construction strong for a while longer,” wrote Julian Evans-Pritchard at Capital Economics in a note.