Well, it’s official. The Chinese economy expanded in 2020.
Or at least according to Beijing it did.
A year on from some of the first harrowing reports documenting the rapid spread of a novel coronavirus in Wuhan, data showed the world’s second-largest economy grew 2.3% last year. The market was looking for 2.1%. For Q4, the expansion was 6.5%, ahead of expectations.
China was poised to be the only major global economy to expand in a virus-blighted year that brought untold suffering to millions around the globe.
Although the economy posted a previously unthinkable contraction in the first quarter of last year, the rebound was swift. China’s factories bounced back quickly, and retail sales eventually firmed, albeit on a somewhat disconcerting lag.
In addition to GDP, Beijing also reported activity data for December on Monday. That too was solid, which comes as no surprise given the recent trend.
Industrial production rose 7.3% last month, easily better than estimates. Retail sales, meanwhile, were a bit soft, rising 4.6% in December. That was at the low-end of the range, but nevertheless marked a fourth consecutive month of growth.
Fixed asset investment was a touch below consensus. The surveyed jobless rate was in-line, at 5.2%.
The reasonably solid activity data comes hot on the heels of last week’s trade figures which were robust. Exports jumped more than 18% last month, while imports were also better than expected. China’s trade surplus hit a record.
Meanwhile, the PBoC is pondering a yuan that’s now strengthened to levels last seen prior to Donald Trump’s decision to ratchet trade tensions sharply higher in mid-2018. Credit provision slowed in December and market participants generally see the central bank as leaning in the direction of further policy normalization, though certainly not in an aggressive fashion.
China Securities Journal on Monday said the PBoC likely won’t tighten liquidity prior to the Lunar New Year holidays. Pre-holiday liquidity conditions are more balanced compared to last year and the year before, the front-page piece said. That provides officials with leeway to “evaluate” the situation.
When it comes to “evaluating” the economic situation, Bloomberg wrote last week that thanks to a 4.2% decline in global output, China’s share of GDP is now 14.5% at 2010 dollar prices. Pre-COVID, China wasn’t expected to hit that milestone until 2022. With the economy seen growing rapidly this year, that share will expand faster, and should reach 15.7% by 2025.
