Opinion: China’s GDP Growth Could Top 8.2% Next Year
Vincent Chan is a China strategist at investment advisory firm Aletheia Capital and a former head of China equity strategy at Credit Suisse.
The International Monetary Fund expects the Chinese economy to expand by 8.2% next year, second only to the 8.8% projected growth for India, according to its October world economic outlook report.
Tighter monetary policy may be the factor that most restrains China’s GDP growth in 2021 as it will slow growth in infrastructure and property investment in the second half. Another drag could be the decline in exports of pandemic prevention products if the Covid-19 pandemic eases up.
Nonetheless, China’s economic growth is expected to accelerate to 8.2% or even higher in 2021, due to this year’s low baseline, the country’s success at controlling the coronavirus and presumably less tense relations with the U.S.
China’s GDP shrank 6.8% year-on-year in the first quarter of 2020, with retail sales, fixed-asset investment and exports falling about 19%, 16% and 13% year-on-year, respectively. These parts of the economy have all returned to growth over the last few months amid the post-pandemic recovery. In addition, consumption, investment and exports are expected to grow by 11%, 9% and 6%, respectively, in 2021, which can support full-year GDP growth of more than 8%.
Businesses and consumers in China are growing more positive about the outlook for the economy in the wake of the country’s rapid recovery from the pandemic. Retail sales rose 4.3% year-on-year in October, a reversal from a 20.5% plunge in the first two months of the year. Meanwhile, companies are growing more confident about investing as the domestic market recovers. Consumption and investment are expected to be the main drivers of economic growth in 2021.
Thirdly, there may be a cooling-off period for China-U.S. relations in the coming year after Joe Biden takes office as the next U.S. president.
Biden’s top concerns during the campaign were Covid-19, the domestic economy, climate change and racial equality. Many of his nominees for key national security and diplomatic posts have served in the Obama or Clinton administrations, suggesting that they will approach relations with China in a much more conventional manner than the current administration. Surer relations between the world’s two largest economies can help stabilize corporate confidence in doing businesses in China and drive up investment.
This commentary has been edited for length and clarity.
Contact translator Luo Meihan (email@example.com) and editor Michael Bellart (firstname.lastname@example.org)
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