Post-Lockdown Recovery Puts China On Fast Track to Become Largest Economy
China is bouncing back relatively quickly from the new coronavirus pandemic and impressively. The Chinese economy returned to pre-pandemic growth levels in the fourth quarter of last year, propelled by surging demand from abroad for Chinese manufactured goods.
Gross domestic product rose by 6.5 percent in Q4 2020 compared to the same period a year earlier while the economy grew by 2.3 percent for the full year, according to official figures released last week Monday.
The economy had contracted by a historic 6.8 percent in Q1 2020, dragged down by coronavirus-related lockdowns but swift measures to get the virus under control as well as huge fiscal and monetary stimulus to boost investment has engineered a quick turnaround.
“The comparatively strong economic performance in 2020 means Chinese authorities understood that controlling the virus was a precondition to getting the economy back up and running,” noted Trey McArver, a partner at consultancy Trivium China. “China’s relatively strong growth in 2020 is because authorities made it their top priority to control the virus.”
As a sign of Chinese success in bringing infection under control, the Chinese province Wuhan where the new coronavirus pandemic is believed to have originated has been holding large concerts to mark the one-year anniversary of its lockdown.
The national economy is now growing faster than it was before the pandemic and economists see China’s GDP expanding by 8.2 percent this year, maintaining its lead over global peers that remain in the throes of the pandemic. That’s significantly higher than the 2 percent projected by Britain-based consultancy Centre for Economics and Business Research (CEBR) earlier this month before official growth figures were announced.
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China’s recovery “will go down in history,” head of the National Bureau of Statistics (NBS) Ning Jizhe was quoted as saying triumphantly on Monday. “These achievements have been achieved while the pandemic is raging around the world, the world economy is in a severe recession, and the external environment [for China] is more complicated and severe. They were hard-won.”
Risks remain however as long as the pandemic lingers as Yue Su, principal economist for the Economist Intelligence Unit, points out. “The GDP data shows the economy has almost normalised. This momentum will continue, although the current Covid-19 outbreak in a couple of provinces in northern China might temporarily cause fluctuation,” said Su.
The full-year GDP growth is the slowest China has seen in more than four decades (since 1976) but is faster than most earlier predictions. It also makes the Asian country the first and probably only major economy to have expanded at all in 2020.
More so, it’s a remarkable recovery from extreme coronavirus lockdown conditions in early 2020 and puts the Asian economy on course to surpass United States GDP sooner than expected.
CEBR in its recent report ranking growth prospects of 193 countries had predicted that the value of China’s economy in dollars would exceed that of the U.S. by 2028, five years earlier than its prediction last year. But some analysts are of the opinion that is likely to happen even sooner.
China’s relatively impressive economic performance is down to its “skillful management of the pandemic” with a strict early lockdown as well as hits to long-term growth in the West, the consultancy said.
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Last year, China’s economic size expanded beyond the 100 trillion yuan ($15.43 trillion) mark and it produced 1 billion tonne of steel for the first time ever. Beijing’s trade surplus with the rest of the world also rose to an all-time high in 2020, driven by exports of face masks and ventilators used to fight Covid-19 outbreaks across the world, as well as of laptops and office equipment used for remote working. Monday’s data shows a 7.3% increase in industrial output.
‘Caveat’ on the numbers
Some analysts have questioned the Chinese numbers, alleging that the calculations have been done with a measure of political manipulation intended to display the impressive economic results of China’s no-nonsense approach to handling the pandemic to the world.
Post-lockdown Chinese growth figures thus appear so impressive partly because of downward revisions of historical data. Recent growth figures have been given exaggerated “headroom” because the data floor had been lowered.
“We should always be circumspect about Chinese data with the usual caveat that the trajectory of the data rather than the figures themselves are a useful guide to how China’s economy is growing,” Asia Business Correspondent Karishma Vaswani wrote in an analysis on the BBC. She however acknowledged Chinese success in bringing the coronavirus pandemic under control, adding, “What these numbers show is that China’s strategy of locking down cities hard and quickly has worked.”