Chinese economy to grow at 9% in 2021

 China was the only economy among G20 to have positive growth rate in 2020

China the second largest economy in the world is expected to grow at 9% in 2021. China is leading the global recovery from the impact of the coronavirus with its robust export growth, strong government spending and a low infection rate. Given China’s rapid rebound, the Centre for Economics and Business Research, a British think tank, predicted last week that China will become the world’s biggest economy in 2028, five years earlier than previously estimated.

In contrast, many other countries have been forced to resume lockdown measures to control the spread of the coronavirus. China’s recovery has seen a number of brokers, including Nomura and China International Capital Corporation (CICC), predict its gross domestic product (GDP) growth for 2021 will be 9 per cent.

China is now expected to be the only Group of 20 nation to show a positive economic growth rate in 2020, predicted to be 1.9 per cent by the International Monetary Fund (IMF) and 2.0 per cent by the World Bank.

Its growth rate is expected to increase sharply in 2021 due to both the continued strong recovery and the low 2020 base for comparison. The IMF then expects China’s GDP growth to be 8.2 per cent next year, while the Organization for Economic Co-operation and Development (OECD) places it at 8 per cent.

The World Bank and CASS each project a slightly lower growth rate of 7.8 per cent.

In its latest global outlook, Standard Chartered Bank projects China’s GDP growth to accelerate to 8 per cent in 2021, adding that year-on-year growth may surge to 18 per cent in the first quarter due largely to the low base following the historic contraction earlier this year, rather than real economic activity.

However, the Chinese Academy of Social Sciences (CASS), a Beijing-based think affiliated with the State Council, cautioned that weak consumption, unemployment and the ongoing struggle among small to medium-sized companies are likely to be major obstacles to growth going forward.

“Even though China’s exports remain resilient this year, it could face problems from poor global economic outlook and shrinking international trade,” CASS said in its 2021 China economy forecast.

To rescue its coronavirus-hit economy earlier this year, China unleashed a flurry of stimulus measures, including increasing the issuance of special treasury bonds to fund infrastructure investment by local governments and tax cuts that lifted the fiscal deficit ratio to a record high of 3.6 per cent of GDP.

In addition, the People’s Bank of China provided extra liquidity to the market, driving down interest rates, while also providing special assistance to struggling small and medium sized companies.

 In November, retail sales growth improved to 5 per cent to mark the fourth successive month of expansion. “Private consumption is likely to catch up, compensating for the loss in 2020, investment should accelerate, led by manufacturing as part of the dual circulation strategy, and the government’s push on infrastructure to deliver stable growth should continue,” added Nomura.

                                                             Khalid Bhatti