China’s economy grows 2.3% in 2020 as recovery gathers pace

China’s economy grew more than expected last year, even as the rest of the world was rocked by the coronavirus pandemic.

The world’s second-largest economy grew 2.3% in 2020 from a year earlier, according to government statistics released on Monday.

It’s China’s slowest annual growth rate in decades – since 1976 the country hasn’t had a worst year, when GDP shrank 1.6% during a period of social and economic turmoil .

But in a year when a crippling pandemic plunged the world’s major economies into recession, China clearly came out on top. The expansion also exceeded expectations. The International Monetary Fund, for example, predicted that the Chinese economy would grow by 1.9% in 2020. It is the only major world economy that the IMF expected to grow.

The pace of the recovery also appears to be accelerating: GDP grew 6.5% from a year ago, faster than the 4.9% growth in the third quarter.

“The performance was better than we expected,” Ning Jizhe, spokesperson for China’s National Bureau of Statistics, told a press conference in Beijing.

The country abandoned its growth target last year for the first time in decades as the pandemic dealt a historic blow to the economy. GDP shrank nearly 7% in the first quarter as large swaths of the country were quarantined to contain the spread of the virus.

Since then, however, the government has attempted to spur growth through large infrastructure projects and by offering cash grants to stimulate citizens’ spending.

Industrial production was a particularly important driver of growth, jumping 7.3% in December from a year earlier.

“In and out of lockdown before anyone else, China’s economy surged as much of the world struggled to maintain balance,” wrote Frederic Neumann, co-head of Asian economics research at HSBC, in a Monday research report.

It has “put a floor under growth” in other regional markets, he added. Increased Chinese investment in infrastructure and real estate, for example, has been a boon for countries like Australia, South Korea and Japan that have exported supplies to China.

Trade was also strong. China’s overall surplus for the year hit a record $535 billion, up 27% from 2019, statistics showed last Friday. Analysts have pointed out that the country benefited from strong demand for protective gear and electronics as people around the world worked from home.

Chinese markets reversed opening losses on Monday to rise after the announcement. The Shanghai Composite gained 0.8%, while the Shenzhen Component Index – a benchmark for the city’s tech-heavy exchange – rose 1.6%. Hong Kong’s Hang Seng Index rose 1%.

However, there are a few weak points. Retail sales lost some steam in December, rising 4.6% compared to 5% in November. Over the full year, retail sales fell 3.9%. Ning, the spokesman for the National Bureau of Statistics, blamed the drop in sales on a resurgence of the coronavirus in some places.

‘Sporadic’ cases in China ‘will bring uncertainty to [our] economic recovery “, he added.

Still, Ning said the country believes the pandemic is under control and authorities expect people to spend more money this year.

Capital Economics analysts, meanwhile, believe the outlook is “bright” in the near term.

“Despite the latest drop in retail sales, we see plenty of upside for consumption as households deplete the excess savings they built up over the past year,” wrote Julian Evans-Pritchard, senior economist for the China at Capital Economics, in a Monday note. “Meanwhile, tailwinds from last year’s stimulus should keep industry and construction strong for some time longer.”

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