China’s economy grows amid Covid-19 recovery

China’s economy grew 2.3% in 2020 as a recovery from the coronavirus pandemic accelerated while the United States, Europe and Japan struggled with disease flare-ups.

Growth in the three months ending in December rose to 6.5% over a year earlier from the previous quarter’s 4.9%, official data showed on Monday.

In early 2020, activity contracted by 6.8% in the first quarter as the ruling Communist Party took the then-unprecedented step of shutting down its economy to fight the virus.

The following quarter, China became the first major country to grow again with a 3.2% expansion after the party declared victory over the virus in March and allowed factories, shops and offices to reopen.

Exports were boosted by demand for Chinese-made masks and other medical goods.

China Economy
China Economy

The growing momentum “reflected improving private consumption expenditure as well as buoyant net exports,” said Rajiv Biswas of IHS Markit in a report.

He said China is likely to be the only major economy to grow in 2020 while developed countries and most major emerging markets were in recession.

The economy “recovered steadily” and “living standards were ensured forcefully”, the National Bureau of Statistics said in a statement, adding that the ruling party’s development goals were “accomplished better than expectation” but no details were provided.

The year 2020 was China’s weakest growth in decades and below the previous recent low of 3.9% in 1990 following the crackdown on a pro-democracy movement, though it was well ahead of the United States and other major economies.

Despite growth for the year, “it is too early to conclude that this is a full recovery,” Iris Pang of ING said in a report. “External demand has not yet fully recovered. This is a big hurdle.”

Exporters and high-tech manufacturers face uncertainty about how US president-elect Joseph Biden will handle conflicts with Beijing over trade, technology and security.

The International Monetary Fund and private sector forecasters expect economic growth to rise further this year to above 8%.

Exports rose 3.6% last year despite the tariff war with Washington. Exporters took market share from foreign competitors that still faced anti-virus restrictions.

Retail spending contracted by 3.9% over 2019 but gained 4.6% in December over a year earlier as demand revived.

Consumer spending recovered to above the previous year’s levels in the quarter ending in September.

Online sales of consumer goods rose 14.8% as millions of families who were ordered to stay home shifted to buying groceries and clothing online.

Factory output rose 2.8% over 2019. Activity accelerated toward the end of the year. Production rose 7.3% in December.

China has re-imposed travel controls in some areas after a spate of cases this month but most of the country is unaffected.

Authorities have called on the public to avoid travel and large gatherings during next month’s Lunar New Year holiday, when millions of people usually visit their hometowns. That might dent spending on travel, gifts and restaurants.

Other activity might increase, however, if farms, factories and traders keep operating instead of closing for up to two weeks for the holiday, Chaoping Zhu of JP Morgan Asset Management said in a report.

“Unusually high growth rates in this quarter are likely to be seen,” said Mr Zhu.