China experiences 2.3% progress in 2020, however the challenges stay for 2021

© Reuters.

From Gina Lee – The Chinese economy grew in 2020 as it controlled the COVID-19 outbreak in the country and positioned itself as the only large country to see economic growth.

Data from the National Bureau of Statistics released earlier in the day showed it was up 7.3% year-over-year in December, above the 6.9% of forecasts made by and the 7% growth earlier in the day in November.

The data also showed that fourth quarter GDP was 6.5% higher than forecast growth of 6.1% and growth of 4.9% in the third quarter. However, GDP grew by 2.6%, which is below the forecast 3.2% and growth of 2.7% in the previous quarter.

Government tax and monetary incentives that spurred investment in infrastructure and real estate resulted in an early recovery. Chinese exports such as medical equipment and home work equipment also saw strong overseas demand as the COVID-19 outbreak was brought under control and factories resumed production. This demand is expected to remain strong as lockdowns and restrictive measures still exist in many countries.

Some investors were optimistic.

“The quarter really seems to have shown that the economy has ended the year strong and manufacturing is doing well,” Cui Li, director of macro research at CCB International Holdings Ltd., told Bloomberg.

Economists generally expect China’s GDP to grow 8.2% in 2021, continuing to outperform global benchmarks, even as other major economies begin their recovery with the introduction of COVID-19 vaccinations.

However, the weather in China has recently been cooler than expected and there has been another outbreak of COVID-19 cases in the northeast of the country. The National Health Commission reported 109 new COVID-19 cases as of January 17.

“The Chinese economy accelerated to a strong end by 2020, although challenges early in 2021 could dampen growth,” said Chang Shu, Bloomberg’s chief economist in Asia.

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