China records 8.1 per cent growth in 2021, but analysts say recovery has been lacklustre

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BEIJING - China's economy grew 4 per cent year on year in the three months to December, bringing its full-year growth for 2021 to 8.1 per cent, the National Bureau of Statistics (NBS) said on Monday (Jan 17).

The latest figures surpassed the predictions of economists polled by Bloomberg who expected the world's second-largest economy to grow 3.3 per cent between October and December last year.

They also exceeded China's own growth target of "above 6 per cent" that Beijing set during the annual parliamentary meetings in March last year.

Still, despite China's seemingly cheery figures, economists said its recovery has been lacklustre since its economy grew by 18.3 per cent year on year between January and March last year on the back of strong exports, fixed asset investments and retail sales.

They pointed out that economic growth has slowed since that first quarter, with expansions coming in at 7.9 per cent, 4.9 per cent and 4 per cent in the later quarters, they added.

Dr Tommy Wu, lead economist at Oxford Economics in Hong Kong, said China's real estate downturn and rash of Covid-19 outbreaks have weighed on the latest quarter's growth.

In November and December last year, the sales of gross floor area - an indicator of the health of the property market - fell by at least 14 per cent year on year each month.

New residential construction projects fell by 31 per cent year on year in December, following a 21 per cent slump in November.

China's property market, which forms up to a third of the economy, has been under stress since top regulators introduced a clampdown in 2020 to curb developers' borrowing to fund their growth.

As a result, a number of giant developers, such as the world's most indebted property firm Evergrande with some US$300 billion (S$404 billion) in outstanding liabilities, have been struggling with liquidity problems.

And 2022 could be a tough year for China.

Mr Ning Jizhe, NBS head and vice-chairman at the National Development and Reform Commission, told the media on Monday that "the domestic economy is under the triple pressures of demand contraction, supply shock and weakening expectations".

DBS Bank senior economist Nathan Chow said: "The Covid-19 variant is the wild card facing China's economy."

"New infections of late have reached a high not seen since March 2020," he added, referring to the latest outbreaks in cities such as Tianjin, Xi'an and Zhengzhou.

On Monday, mainland China reported 223 new Covid-19 cases, the highest number since March 2020.

Senior China economist Julian Evans-Pritchard from Capital Economics said "the downturn in property construction is set to deepen" this year.

And given that "supply chains (are) already stretched to capacity, last year's boost from surging exports can't be repeated", he added.

China posted a record trade surplus last year, with the annual trade surplus at US$676.43 billion - the highest since records started in 1950.

Mr Evans-Pritchard added that more contagious Covid-19 variants such as Omicron will mean more frequent disruptions to service sector activity.

China was the first major economy to bounce back from the pandemic in 2020, recording a growth of 2.3 per cent from a year before.

But last year, besides the Covid-19 outbreaks and ongoing credit crunch in the property sector, power shortages also weighed on China's economic growth.

In late September, as many as 20 provinces in the world's largest factory had reportedly been hit by the surge in the price of coal and a shortage of electricity, with production lines temporarily shuttered or working on short hours.

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