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China’s gross domestic product expanded 6.5 percent in the fourth quarter of 2020, beating forecasts and making the country one of the few in the world to post positive growth for the year.
Year-on-year GDP growth for the latest quarter beat expectations, according to official data released Monday, and the Chinese economy expanded 2.3 percent over the course of the full year as industrial production continued to drive the recovery of the country.
The new data underscored a rapid change in the world’s second-largest economy, which declined in early 2020 for the first time in more than four decades after authorities imposed an extensive lockdown to halt the initial outbreak of the pandemic.
In the fourth quarter, year-on-year growth was the highest of any quarter since 2018, and China will be the only one of the world’s largest economies that did not contract last year.
But its positive full-year GDP growth, though ahead of its world peers, remained China’s weakest in more than 40 years due to the contraction earlier in the year.
China’s benchmark CSI 300 index of stocks listed in Shanghai and Shenzhen rose 1.1 percent after the data was released, while equity markets in the rest of the Asia-Pacific region fell.
Ning Jizhe, head of the National Bureau of Statistics, said the economy “recovered steadily” last year, but cautioned that “the changing epidemic dynamics and the external environment pose a multitude of uncertainties,” and that “the underlying for economic recovery has yet to be established. ” consolidated”.
China’s rally from Covid-19 has been driven by higher industrial production, which benefited from state support and added 7.1 percent in the fourth quarter, compared with 5.8 percent in the previous quarter.
Retail sales, a measure of consumer appetite, have lagged the industrial sector, adding 4.6 percent in the fourth quarter. December’s reading, which was also 4.6%, was below 5% year-on-year growth in November and below expectations.
Consumer spending has been a weak point in China’s recovery and coincides with the lowest inflation rate in more than a decade, but many analysts expect a revival this year.
Credit Suisse economists improved their forecasts for China’s growth in 2021 to 7.1 percent from 5.6 percent, pointing to consumption as the main driver of growth.
The GDP figures were released days after China posted its highest monthly trade surplus in December, fueled by three straight months of double-digit export growth. Exports, which have been supported by demand for medical equipment and products related to the lockdown, rose 18% last month compared to the same period a year earlier.
The data adds to a series of measures that reflect a booming Chinese economy. This month, the renminbi surpassed 6.5 against the US dollar for the first time since 2018, while China’s stock market reached its highest level since the global financial crisis.
In September, China’s imports reached their highest level in dollar terms. The country’s industrial boom has generated high demand for raw materials, with iron ore imports increasing 9.5% to a total of 1.17 billion tonnes in 2020.
“China’s economy seems to be constantly running at full speed,” said Eswar Prasad, a China finance expert at Cornell University, adding that it was “leaving other major economies in the dust.”
The country’s return to growth last year drew strong appetite from foreign investors, who funneled roughly Rmb1tn ($ 154 billion) in Chinese stocks and bonds through Hong Kong’s investment programs in 2020.
Chaoping Zhu, global market strategist at JPMorgan Asset Management, suggested that domestic economic activities are likely to “improve in 2021” with the additional support of a global economic recovery.
“Particularly in the first quarter of 2021, we expect to see strong growth readings as the rising pandemic control measures begin to take effect,” he said.
In China, new Covid-19 cases dropped to a trickle in mid-2020, but a recent outbreak in the northern province of Hebei has prompted the re-imposition of closures. Last week, the country reported its first coronavirus death since April.
Unemployment was 5.2 percent in December, unchanged from the previous month. Investment in fixed assets added 2.9% throughout the year, while investment in real estate increased 7%.
Additional information from Xinning Liu in Beijing and Hudson Lockett in Hong Kong
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