What to Expect as China’s Economy Enters 2021
2020 was a turbulent year for global economies due to the COVID-19 pandemic, with the IMF projecting global growth contraction by 4.4
percent – the worst recession since the Second World War.To get more
economy news today, you can visit shine news official website.
However, China – despite being the pandemic’s epicenter – was the first and only major economy to recover and enter 2021 with a relatively
optimistic outlook. Beijing’s stable and time-sensitive policy
responses, epidemic control strategy, and reprioritization of
macroeconomic objectives ensured that it was the sole G20 economy that
experienced positive growth in 2020. In fact, it is estimated that
China’s Q4 growth returned to pre-pandemic levels.China’s GDP growth
shrank by 6.8 percent year-on-year in Q1 2020. However, it bounced back
to a growth rate of 3.2 percent in Q2 and 4.9 percent in Q3.
Economists estimate that China’s GDP will grow by five to six percent year-on-year from October to December 2020, returning the economy to
its pre-pandemic levels – China’s GDP growth rate in 2019 was revised to
six percent.
In October last year, the IMF forecast that China’s GDP would grow 1.9 percent in 2020 – an adjustment from the one percent it predicted in
June. At the same time, the IMF projected that GDP growth of developed
economies would shrink by 5.8 percent and emerging markets would shrink
by 3.3 percent in 2020. This meant that despite the conservative
estimate, China was an outlier.China’s economic rebound was driven by a
combination of factors, including massive investment in infrastructure
and real estate, export booms boosted by the strong global demand for
medical supplies, medical equipment, and electronics, and the steady
pick-up in domestic consumption after a long period of sluggish growth.
Compared with the weak base in 2020, many analysts expect China’s economic growth will reach around eight to nine percent in 2021.China’s
return to economic normality could mean policy normalization this year.
But a balance will need to be struck by top policymakers between
restarting economic reforms and not killing growth.
In the recent Central Economic Work Conference, top policymakers were cautious about making major changes to the country’s stimulus policies
and pledged to maintain continuity in macroeconomic policies in
2021.Recently, the State Council extended measures on allowing small and
micro-sized enterprises to defer loan repayments; two ministries
required small-value government procurement projects to be entirely
commissioned to small and medium-sized enterprises (SMEs). These are
signs that national leaders think that full recovery is not yet
completed and they will continue to support small businesses and
stabilize employment.
On January 6, China’s central bank outlined key policies in 2021, saying that it would implement a prudent monetary policy that is
flexible, precise, reasonable, and moderate. Policies on inclusive loan
repayment extension and credit loan support program for small business
will be prolonged. At the same time, the central bank will channel more
financial resources toward green development and promote opening-up in
the financial sector.
On the other hand, China is starting to re-emphasize the “high-quality development” of its economy, which implies the revival of
its ambitious economic reforms – supply-side reform and the recently
proposed demand-side reform are back on Beijing’s policy agenda.
In addition to eliminating excess and backward production capacity, de-leveraging the economy, and moving up the value chain, China is
planning to shift some of its focus on reforms on the demand-side, after
COVID-19 left many lower income Chinese consumers without financial
cover and further widened the gap between the rich and poor.
