China’s GDP grew 6.5% in the final quarter of 2020, making it the only major economy to expand last year

2021 01 04T015330Z_1_LYNXMPEH03022_RTROPTP_4_CHINA ECONOMY PMI.JPG
China’s factory production helped its economy to grow in 2020 despite the coronavirus pandemic.

The Chinese economy beat expectations to grow 6.5% in the final quarter of 2020, according to official figures on Monday, capping off a rapid recovery from the coronavirus lockdowns in the first few months of the year and further cementing China as an economic powerhouse.

The final-quarter figures meant gross domestic product grew 2.3% over 2020 as a whole. It was China’s slowest expansion since the 1970s, but nonetheless made it the only major economy to grow last year.

China’s National Bureau of Statistics said: “The national economy recovered steadily, employment and living standards were ensured forcefully, and the main goals and tasks of economic and social development were accomplished better than expectation.”

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In the first three months of 2020 China’s economy shrank 6.8% as the new form of coronavirus took hold in Wuhan and the government ordered stringent lockdowns.

But China’s hugely powerful state clamped down on COVID-19, allowing the economy to grow 3.2% in the second quarter and 4.9% for the third.

The country’s overall economic growth of 2.3% in 2020 compares to World Bank forecasts of a 3.6% contraction in the US and a 7.4% fall of in the Eurozone. Advanced economies as a whole are expected to have contracted by 5.4% in 2020, the World Bank said earlier this month.

China’s industrial production – heavily supported by the state – has been at the heart of its recovery. Factory output jumped a further 7.1% in the final three months of 2020, after growing 5.8% in the previous quarter.

Domestic consumption has been weaker, with retail sales growing 4.6% in the final quarter, but falling 3.9% across the year as a whole.

But China increased the value of its exports by 4% across the year, helping it hit a new record trade surplus in December, thanks to the appreciation in the yuan.

Commerzbank economist Hao Zhou said: “As the developed countries have re-imposed lockdown measures due to virus resurgence, the supply chain has been disrupted which forced many orders to shift to China as the economy has been normally operating.

“In our opinion, the strong exports have significantly contributed to China’s economic outperformance.”

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Despite its success in containing coronavirus after the initial outbreak, China has recently suffered a new flare-up in the north east and last week reported its first death since the spring.

Tommy Wu, lead economist at consultancy Oxford Economics, said: “Following new restrictions announced due to COVID-19 outbreaks in two provinces, it is possible that reduced confidence and travel during the Chinese New Year holidays hamper Q1 growth.

“But for now, we think that the risk of major economic impact is low, given China’s track record in containing COVID.”

The World Bank earlier this month predicted China’s economy would grow 7.9% in 2021. Oxford Economics previously predicted growth of 8.1% in 2021, but on Monday said it would upgrade its forecasts.

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