Chinese economy picks up speed in Q4, ends 2020 in solid shape

BEIJING • China's economy picked up speed in the fourth quarter, with growth beating expectations as it ended a rough coronavirus-hit 2020 in remarkably good shape and remained poised to expand further this year even as the global pandemic rages unabated.

Gross domestic product (GDP) grew 2.3 per cent last year, official data showed yesterday, making China the only major economy in the world to avoid a contraction last year as many nations struggled to contain the Covid-19 pandemic.

And China is expected to continue to power ahead of its peers this year, with GDP set to expand at the fastest pace in a decade at 8.4 per cent, according to a Reuters poll.

The world's second-largest economy has surprised many with the speed of its recovery from the coronavirus jolt, especially as policymakers have also had to navigate tense United States-China relations on trade and other fronts.

China's strict virus curbs enabled it to largely contain the Covid-19 outbreak much quicker than most countries, while government-led policy stimulus and local manufacturers stepping up production to supply goods to countries crippled by the pandemic have also helped fire up momentum.

Year-on-year GDP expanded 6.5 per cent in the fourth quarter, data from the National Bureau of Statistics (NBS) showed, quicker than the 6.1 per cent forecast by economists in a Reuters poll, and followed the third quarter's solid 4.9 per cent growth.

"The higher-than-expected GDP number indicates growth has stepped into the expansionary zone, although some sectors remain in recovery," said ANZ economist Xing Zhaopeng in Shanghai. "Policy exiting will pose counter-cyclical pressures on 2021 growth."

Backed by the strict virus containment measures and policy stimulus, the economy has recovered steadily from a steep 6.8 per cent slump in the first three months of last year, when a Covid-19 outbreak in the central city of Wuhan turned into a full-blown epidemic.

Asia's economic powerhouse has been fuelled by a resilient export sector, but China's consumption has lagged expectations amid fears of a Covid-19 resurgence.

Yet, underscoring the massive Covid-19 impact worldwide, China's GDP growth last year marked its weakest pace since 1976, the final year of the decade-long Cultural Revolution that wrecked the economy.

Overall, the slew of economic data has reduced the need for more monetary easing this year, leading the central bank to scale back some policy support, sources told Reuters, but there would be no abrupt shift in policy direction.

On a quarter-on-quarter basis, GDP rose 2.6 per cent in the October-December period, NBS said.

Highlighting the weakness in consumption, retail sales fell 3.9 per cent last year, marking the first contraction since 1968, records from NBS showed.

However, China's vast manufacturing sector continued to gain momentum, with industrial output rising at a faster-than-expected rate of 7.3 per cent last month from a year ago.

Mr Ning Jizhe, head of China's statistics bureau, told a briefing that there would be many favourable conditions to sustain China's economic recovery this year, citing the country's large market and resilient supply chains.

China still faces many challenges, not least tensions between Beijing and Washington and how they would play out under the new US administration led by President-elect Joe Biden.

Rising labour costs, the ageing population and a recent spike in credit defaults add to risks for an economy that is still trying to reduce a mountain of debt.

REUTERS