China’s fourth-quarter GDP growth breaks record, ends 2020 in solid position after COVID-19 shock

BEIJING (Reuters) – China’s economy grew at a faster-than-expected pace in the fourth quarter of last year, ending a 2020 in extraordinarily good condition with the coronavirus and has remained firmly poised to expand further this year.

Gross domestic product (GDP) grew 6.5% yoy in the fourth quarter, data from the National Bureau of Statistics showed Monday, faster than the 6.1% expected by economists in a Reuters poll, and followed a 4.9% growth in the third quarter.

GDP grew 2.3% in 2020, the data showed, 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.

“The higher than expected GDP number indicates that growth has entered an expansionary zone, although some sectors remain recovering,” Xing Zhaopeng, an ANZ economist in Shanghai.

“The exit from politics will put counter-cyclical pressures on growth in 2021”.

Backed by tight virus containment measures and political stimulus, the economy has experienced a steady recovery from a sharp decline of 6.8% in the first three months of 2020, when a COVID-19 outbreak in the central city of Wuhan turned into a full-blown outbreak.

The world’s second largest economy has been fueled by a surprisingly resilient export sector, but consumption – a key driver of growth – has lagged expectations amid fears of a resurgence in COVID-19 cases.

Data from last week showed that Chinese exports rose more-than-expected in December as coronavirus outages around the world fueled demand for Chinese goods even as a stronger yuan made exports more expensive for buyers. foreigners.

However, underlining the massive disruptions of COVID-19 around the world, China’s GDP growth in 2020 was the weakest pace in over four decades.

Overall, the brighter economic data series has reduced the need for more monetary easing this year, leading the central bank to scale back some political support, sources told Reuters, but there would be no sudden change in policy. political direction, according to key policy makers.

On a quarter-over-quarter basis, GDP increased 2.6% in October-December, the bureau said, compared to expectations of a 3.2% increase and a revised 3.0 increase in the previous quarter. .

Highlighting the weakness in consumption, retail sales fell by 3.9% last year, marking the first contraction since 1968, a record from NBS showed. Retail sales growth in December missed analysts’ forecasts and fell to 4.6% from 5.0% in November, due to the slowdown in sales of clothing, cosmetics, telecommunications and automobiles.

However, China’s vast manufacturing sector continued to gain momentum, with industrial production rising at a faster-than-expected rate of 7.3% last month. from a year ago, peaking since March 2019.

Analysts expect economic growth to rebound to 8.4% in 2021, before slowing to 5.5% in 2022.

While this year’s projected growth rate would be the strongest in a decade, led by a large leap in the first quarter, it is made less impressive by the low base established in 2020 hit by a pandemic.

Some analysts have also warned that a recent rebound in COVID-19 cases in China could impact activity and consumption ahead of next month’s long Lunar New Year holidays.

China has reported more than 100 new cases of COVID-19 for the sixth consecutive day, with the increase in infections in the northeast fueling concerns of another national wave ahead of a major holiday season.

Additional reporting by Stella Qiu; Editing by Shri Navaratnam