China’s GDP grew at the slowest pace in more than four decades in 2020, official data showed on Monday, but it was still expected to be the only major economy to grow at all after a strong rebound from the coronavirus crisis.
Covid-19, which has ravaged the world economy, first emerged in central China in late 2019. But the world’s second-largest economy also became the first to bounce back after imposing strict lockdowns and virus control measures.
The National Bureau of Statistics (NBS) said last year was a “grave and complex environment both at home and abroad” with the pandemic having a “huge impact”.
The 2.3 per cent expansion in 2020 was a marked slowdown from 2019’s revised growth of 6.0 per cent — itself already the lowest in decades — with the country hit by weak domestic demand and trade tensions.
But it is better than that forecast by an AFP poll of analysts from 13 financial institutions, who had predicted a 2.0 percent expansion.
In the last three months of 2020, China’s economic rebound continued with a better-than-expected 6.5 per cent growth on-year, a sustained improvement since the second quarter.
This brings it back to a pre-pandemic trajectory, although full-year 2020 growth is still its worst performance since a 1.6 contraction in 1976, the year Chairman Mao Zedong died.
That was two years before former leader Deng Xiaoping set in motion a shift away from communist-style central planning, turning China into an industrial, trade and tech powerhouse.
Recovery ‘not yet firm’
NBS commissioner Ning Jizhe told reporters the foundation for China’s economic recovery “is still not yet firm”. “There are many uncertainties in the changing dynamics of the pandemic, as well as the external environment,” he said.
According to the latest data, industrial production grew 2.8 per cent on-year for 2020, slowing further from previous years.
Retail sales, whose recovery has lagged behind that of industrial activity, shrank 3.9 per cent for the full year with consumers wary of spending as the pandemic lingered.
This marks the first contraction in retail sales since 1968, underscoring difficulties amid China’s push to rebalance its economy with domestic consumption as the main driver.
But the urban unemployment rate remained at 5.2 per cent, and Ning said the number of newly-employed in urban areas was more than 11 million — exceeding the target of nine million.
However, experts have cautioned unemployment could be higher than official figures suggest due to the large numbers of people in China’s informal workforce.
“The strengthening momentum of China’s economic rebound during the fourth quarter of 2020 reflected improving private consumption expenditure as well as buoyant net exports,” Rajiv Biswas, IHS Markit’s Asia-Pacific chief economist, told AFP.
He added exports were helped by rebounding orders from the United States and Europe, including shipments of medical equipment during the pandemic.
But Iris Pang, ING chief economist for Greater China, said “when China can achieve a complete recovery is still an open question”, given that without fiscal and monetary stimulus, the economy would not have recovered at such a pace.
She added: “The risk of a technology war between China and some economies remains if the US does not remove some measures.”
New government restrictions due to local Covid-19 outbreaks could also hamper first quarter growth this year, said Louis Kuijs of Oxford Economics.