The Chinese economy continues to recover from the Covid-19 crisis, assisted by supportive fiscal and monetary policies and effective containment of the virus, according to an analysis by Scotiabank.
After the economy recovered to positive growth territory in the second quarter of 2020, the recovery has gradually become more widespread.
In fact, according to the bank, China’s industrial sector is no longer the main source of growth, as the momentum is also underpinned by strong activity in the service sector.
In 2020, China was an exception among the world’s major economies, as it was able to grow its GDP; its production grew 2.3 percent.
The data shows that China’s industrial, manufacturing and export-oriented parts of the economy recovered relatively quickly and face a favorable outlook given the recovery in global demand.
Meanwhile, the strengthening of consumer confidence and the recovery of retail trade mean that the dynamics of domestic demand is also recovering.
Scotiabank forecasts that the Chinese economy will grow 8.3% year-on-year in 2021, supported by the recovery of the global economy, suppressed demand and a low base of comparison.
For Scotiabank, the pace of growth is likely to return to a more sustainable path in 2022, with production gains expected to average 5.9% year-on-year.
The annual session of the National People’s Congress (NPC) was held in March. The NPC is the highest state power body in China with the ability to enact legislation, approve the government budget and ratify development plans.
Rapid and sustained economic growth continues to be important for China, although the announced growth target for the Chinese economy for 2021 of “more than 6%” is less ambitious than in previous years; the bank expects it to be outperformed by a comfortable margin.
Likewise, the government will maintain a proactive fiscal policy stance in 2021. The central government budget deficit will shrink only slightly this year to 3.2% of GDP from 3.6% in 2020, while the issuance of special local government bonds will remain substantial in 3.65 trillion CNY, equivalent to around 3.5% of GDP (compared to 3.75 trillion CNY in 2020 and 2.15 trillion CNY in 2019).