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International experts: China’s economy will grow steadily in 2021
China Daily 2020-12-21
In 2020, the world economy was hit hard by the new corona epidemic. However, as research and development of the new corona vaccine progresses, people have optimistic expectations for global growth. Although there is still uncertainty about the speed of global vaccine launches, social distancing restrictions are expected to continue to relax in 2021, so global economic activity will inevitably recover. Even countries that have been slow to launch vaccines will benefit from the side effects caused by the recovery of other economies.
China has already recovered from the economic recession caused by the epidemic in the first quarter of 2020 and will enter steadily into 2021. With the rebound in consumption and business investment, China’s growth situation is expected to further consolidate in 2021.
For most of 2020, growth in the industrial and investment sectors has driven the recovery, while consumption is gathering momentum towards the end of the year. In 2021, driven by factors such as job growth and the reduction of the epidemic, the momentum of consumption may become stronger. With improving sentiment, profitability and the global economic outlook, along with reduced geopolitical risks, we expect business investment, which accounts for about half of total investment, to recover. “New infrastructure” fields such as 5G, new energy, electric vehicles, and data centers can see substantial growth, most of which is reflected in corporate investment.
The outlook for China’s exports is improving The outlook for world trade and new export orders that are part of the China Manufacturing Purchasing Managers Index indicate improved export demand. However, many of the one-off purchases related to the epidemic will not be repeated in 2021. In addition, the provision of vaccines will reduce the need to maintain social distancing, so that the global consumption of goods to services may change.
Overall, China’s imports should continue to grow substantially. We hope that exporters of capital goods from countries like Germany and Japan will benefit from this.
China’s economic recovery will be further consolidated in the first half of next year, with GDP in the first quarter expected to grow by about 19% year-on-year. Furthermore, the “14th Five-Year Plan” is dedicated to promoting higher quality growth. We expect GDP growth in 2021 to remain stable month-over-month. In the second half of the year, month-to-month growth will increase due to improved global economic growth and the adjustment of some political positions.
China’s balance of payments may remain relatively stable. Based on import and export trends, we expect the current account surplus to decline in 2021. However, in light of China’s strong growth prospects, higher interest rates than most developed countries and further opening of the financial market, its foreign direct investment and investment in securities are expected to gain momentum next year.
Foreign companies want to continue operating in China
The new US administration can implement a more pragmatic and stable policy towards China. The offensive and unpredictable policies implemented by the current US government have put pressure on investment and economic activities, and China’s new policy may have a positive impact. Additionally, increased dialogue and cooperation on “global common interests” such as climate change and public health should help ease bilateral tensions and risks.
In any case, governments and companies around the world are keen to continue collaborating with China. China’s manufacturing industry is still highly competitive in many fields, and the Chinese market remains attractive to foreign companies, so there will be no serious “decoupling”.
Difficult external conditions have led China to adjust its long-term development strategy. China is committed to implementing a “double cycle” and emphasizes technological self-reliance and self-reliance. Therefore, in the coming years, China is expected to invest more in research and development and increase investment in high-tech fields, especially in the fields of high-end and semiconductor manufacturing.
(The author is Gao Luyi, Director of Asian Economic Research, Oxford Economics Institute, UK)
Publisher: Wang Yu
