Date: Wednesday, January 20, 2021
Source: Wall Street Journal
BEIJING—China’s economy expanded by 2.3% in 2020, roaring back from a historic contraction in the early months of the year to become the only major world economy to grow in what was a pandemic-ravaged year.
China’s ability to expand, even as the world struggled to control a deadly virus that has killed more than two million people, underscores the country’s success in largely taming the coronavirus within its borders and further cements its place as the dominant economy in Asia.
China’s growth makes it an outlier among large economies. The World Bank expects the U.S. economy to have contracted by 3.6% and the eurozone’s to have shrunk by 7.4% in 2020, contributing to a global economic pullback of 4.3%.
China’s economy, the world’s second largest, finished the year on a high note. Gross domestic product rose 6.5% in the fourth quarter from a year earlier, according to data released by the National Bureau of Statistics on Monday, marking China’s best quarter of year-over-year growth in two years.
By comparison, China’s GDP rose by 3.2% and 4.9% in the second and third quarters of the year, respectively, after suffering a historic 6.8% contraction in the first.
“In an extraordinary year, China’s economy was able to record an extraordinary achievement, handing over a result that satisfied the Chinese people, attracted the attention of the world and which can be written in the annals of history,” Ning Jizhe, head of the statistics bureau, said Monday. Mr. Ning said in 2020 the size of China’s economy surpassed 100 trillion yuan, or the equivalent of $15.4 trillion, while GDP per capita topped $10,000 for the first time.
The results also beat analysts’ expectations. Economists polled by The Wall Street Journal expected growth of 6% in the fourth quarter and an expansion of 2.2% for the full year.
China’s full-year growth rate of 2.3% marked the country’s weakest annual economic expansion since Mao Zedong’s death in 1976. Before 2020, the worst economic year of China’s “reform and opening” era that began in the late 1970s came in 1990, the year after the Tiananmen Square crackdown, when the economy grew by 3.9%.
By logging 6.5% growth in the final quarter, China’s economy has reclaimed the growth trajectory that it had been on before the coronavirus first began to spread across the city of Wuhan around a year ago. In the last three months of 2019, the last full quarter before the coronavirus began disrupting the global economy, China’s GDP rose 6% from a year earlier, contributing to a 6.1% expansion for the full year.
This time last year, Chinese authorities in and around Wuhan began reporting large numbers of people who were infected with what was then a mysterious viral pneumonia. After Beijing took the unprecedented step of locking down Wuhan on Jan. 23 last year, economic activity across the country ground to a virtual halt for much of the following months until the virus was largely stamped out.
Unlike governments in Western countries like the U.S. that focused their stimulus efforts on lowering borrowing rates and handing out money to consumers, Beijing focused on restarting factories while keeping interest rates relatively higher.
China’s factories began to come back online in April, just as much of the rest of the globe’s manufacturing capacity was taken out by the spreading pandemic. That allowed China to produce and export mass quantities of medical equipment, like face masks, and work-from-home equipment, such as laptops and computer monitors.
Domestic consumption, however, continued to languish well into the summer, as Chinese consumers were worried about a resurgence in infections. Retail sales didn’t return to their pre-coronavirus levels until August and have remained relatively weak as a contributor to the overall economy as outbreaks have continued to pop up.
On Monday, China’s statistics bureau said retail sales rose by just 4.6% in December from a year earlier, lower than November’s 5% increase and a 5.5% expansion expected by economists. For the full year, retail sales fell 3.9% in 2020 from a year earlier, compared with 2019’s 8% growth.
A current wave of new cases across northern China, centered in Hebei province—which surrounds Beijing—is the worst in more than half a year, with hundreds of local infection cases showing symptoms in recent days. The outbreak threatens to derail consumer spending during next month’s long Lunar New Year holiday.
Even so, many forecasters expect China to grow by another 8% or more in 2021 as other parts of the economy continue to make up for the lost time last year. Data released Monday showed employment and wages remain robust, which could help support consumption.
China’s headline measure of joblessness, the official urban surveyed unemployment rate, held steady at 5.2% in December, on par with the pre-virus level a year earlier, according to the statistics bureau.
Migrant workers’ wages rose by 2.8% in the final three months of 2020, compared with a 2.1% increase in the previous quarter.
For now, the economic data released Monday reveals a Chinese economy that continues to be driven primarily by industrial production and investment rather than consumption.
Industrial output rose 7.3% in December from a year earlier, accelerating from 7% growth in November and beating expectations for a 6.8% increase among economists polled by The Wall Street Journal. For the full year, industrial production increased 2.8% from a year earlier in 2020, weaker than 2019’s 5.7% increase.
Fixed-asset investment grew 2.9% in 2020 from a year earlier, speeding up from a 2.6% year-over-year increase recorded for the first 11 months of the year but slower than 2019’s full-year growth of 5.4%.
Any further recovery will likely have to take place without additional aid from the government, said Xing Zhaopeng, a Shanghai-based economist at ANZ.
With local governments in China still swimming in unspent stimulus money left over from last year, which Mr. Xing estimates to be about 2 trillion yuan, the equivalent of around $300 billion, he argues Beijing will likely restrict the amount of debt local governments can issue this year.
“Given the stronger-than-expected economic growth in the fourth quarter, China’s policy exit could come sooner than expected,” Mr. Xing said, pointing to recent remarks by officials indicating a withdrawal of stimulus measures introduced last year.