China’s GDP grew 6.5% year on year in the fourth quarter, more than expected 6.1%. The overall growth in 2020 was 2.3%, with analysts now expecting China’s GDP to expand at the fastest in a decade at 8.4%.
- China’s annual growth means that it is the only major economy in the world to avoid a contraction last year as countries struggled to contain the COVID-19 pandemic.
- China’s growth has been fueled by Beijing’s strict virus curbs, government-led policy stimulus, and local manufacturers stepping up production to supply goods to countries crippled by the pandemic
- The positive economic data of China has reduced the need for more monetary easing this year, leading the central bank to scale back some policy support
- China’s large market and resilient supply chains are expected to sustain economic recovery in 2021
- Analysts are also optimistic as this year marks the start of China’s 14th five-year plan, which will steer the economy past the “middle-income trap.”
- “The higher-than-expected GDP number indicates that growth has stepped into the expansionary zone, although some sectors remain in recovery”- Xing Zhaopeng, ANZ economist
- “Policy exiting will pose counter-cyclical pressures on 2021 growth”- Zhaopeng
- Despite the strong growth, China’s consumption has lagged expectations amid fears of a resurgence of COVID-19 cases, and continuing technology war with the U.S
- China also faces rising labor costs, an aging population, and a spike in credit defaults which adds risks to the economy.
Chinese stocks are gaining as the Yuan loses. CSI 300 is up 1.11%, USDCNY is up 0.17%
