China’s Growth Beats Forecasts, Aiding Global Economic Rise

GDP rose 6.5% in fourth quarter, faster than expected. China could surpass U.S. as largest economy by 2028.

China’s economy exceeded its pre-pandemic growth rates in the fourth quarter as its export-led recovery quickened, enabling it to expand faster than expected over the whole year even as major peers contracted. Gross domestic product climbed 6.5% in the final quarter from a year earlier, propelling growth to 2.3% for the full year, the statistics bureau said Monday. Economists surveyed by Bloomberg had predicted 6.2% expansion for the quarter and 2.1% for the whole of 2020.

“China has more than returned to trend growth,” said Raymond Yeung, chief economist for Greater China at Australia and New Zealand Banking Group. The strong rebound means authorities can “prioritize structural reforms rather than economic reflation” in 2021, he said.

The V-shaped recovery was based on successful control of Covid cases and fiscal and monetary stimulus that boosted investment in real estate and infrastructure. Growth was further spurred by overseas demand for medical equipment and work-from-home devices, with exports expanding 3.6% in 2020 compared to the previous year.

Still, the investment and export-driven recovery exacerbated existing imbalances in the economy as domestic consumption lagged.

“There’s a huge discrepancy between production and consumption,” said Bo Zhuang, chief China economist at TS Lombard. “I am not very optimistic about domestic demand, as wage growth is not back to pre-pandemic levels.”

Source: Bloomberg