China’s post-Covid economic recovery intact in January and February, but rebound not yet ‘solid’, NDRC says
- Electricity generation and rail cargo volume in China have surged in the two months, showing a continued rebound from the coronavirus pandemic a year ago
- Despite the strong numbers, China’s top economic planning agency says consumer spending is still subdued and there are challenges in the global economy
China’s economic recovery from the damage caused by the coronavirus pandemic is “not yet solid”, although the trend of steady improvement continued at the beginning of 2021, the country’s top economic planning agency said on Monday.
Ning Jizhe, deputy director of the National Development and Reform Commission, cited a 24.2 per cent year on year rise in electric power generation in January and February and a 16.5 per cent increase in rail freight volume over the same period as examples of China’s continued economic rebound.
In addition, the proportion of companies and investment projects that reopened after the Lunar New Year holiday were both higher than in previous years, pointing to strong production momentum in the world’s second largest economy, said Ning, who is also head of the National Bureau of Statistics (NBS).
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Economic indicators such as electricity generation, rail cargo volume and bank lending were used as alternatives to gross domestic (GDP) output by current premier Li Keqiang when he was Communist Party chief in the northeastern province of Liaoning between 2004-07.
These non-traditional indicators were dubbed as the “Li Keqiang Index” by The Economist magazine.
Like the electricity generation and rail freight volume figures, the surge in trade volume in percentage terms was due in part to the low comparison base from the same period last year, when the coronavirus tore through the world’s second-largest economy.
Household consumption is still restrained, investment growth is insufficient, small, medium and micro-sized enterprises and self-employed entrepreneurs are suffering
But even taking this and the impact of the Lunar New Year holiday period into consideration, the figures still point to strong growth at the beginning of this year.
Next Monday, the NBS is due to release key economic figures for the combined January-February period, including industrial output, retail sales and fixed-asset investment. Data for January and February are combined to smooth out the impact of the Lunar New Year holiday, which falls at different times during the two months of each year.
Despite the strong numbers so far in the first quarter, Ning said the foundation for economic recovery remained relatively weak domestically.
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Ning in particular pointed to consumer spending that remained subdued, a worry given Chinese leaders were relying more on the domestic market to drive future growth under the new “dual-circulation” strategy.
National per capita consumption expenditures shrank by 4 per cent last year, even though national per capita disposable income grew 2.1 per cent, the NDRC said.
“Household consumption is still restrained, investment growth is insufficient, small, medium and micro-sized enterprises and self-employed entrepreneurs are suffering more difficulties,” he said at a press conference.
The NDRC official also said China was facing rising foreign uncertainties and instabilities, citing the more complex international economic situation caused by the impact of the pandemic in other major economies.
We must actively guard against and properly respond to various external risks
“We must actively guard against and properly respond to various external risks, and use the certainty of active domestic efforts to hedge the uncertainties from the complex international environment,” he said.
China will further leverage investment to drive growth this year, which Ning argued had made an indelible contribution to ensuring overall economic expansion last year.
In its draft plan for economic development in 2021 released last Friday, the NDRC said it would allocate 610 billion yuan (US$93.8 billion) from the central government budget and issue 3.65 trillion yuan of local government special-purpose bonds to enhance infrastructure investments.
Ning said those funds will be used as part of a national initiative to revamp old residential buildings, major infrastructure projects and public service facilities, including in the fields of transport, energy, agriculture, environmental protection, social initiatives, logistics enhancements, and municipal and industrial estates.
The agency will also release a detailed five-year plan for new infrastructure, to “vigorously develop the digital economy, expand 5G applications and accelerate the construction of industrial internet and data centers”, Ning said.
