What to Expect as China’s Economy Enters 2021 from buzai232's blog

2020 was a turbulent year for global economies due to the COVID-19 pandemic, with the IMF projecting global growth contraction by 4.4 percent – the worst recession since the Second World War.To get more economy news today, you can visit shine news official website.

However, China – despite being the pandemic’s epicenter – was the first and only major economy to recover and enter 2021 with a relatively optimistic outlook. Beijing’s stable and time-sensitive policy responses, epidemic control strategy, and reprioritization of macroeconomic objectives ensured that it was the sole G20 economy that experienced positive growth in 2020. In fact, it is estimated that China’s Q4 growth returned to pre-pandemic levels.China’s GDP growth shrank by 6.8 percent year-on-year in Q1 2020. However, it bounced back to a growth rate of 3.2 percent in Q2 and 4.9 percent in Q3.

Economists estimate that China’s GDP will grow by five to six percent year-on-year from October to December 2020, returning the economy to its pre-pandemic levels – China’s GDP growth rate in 2019 was revised to six percent.

In October last year, the IMF forecast that China’s GDP would grow 1.9 percent in 2020 – an adjustment from the one percent it predicted in June. At the same time, the IMF projected that GDP growth of developed economies would shrink by 5.8 percent and emerging markets would shrink by 3.3 percent in 2020. This meant that despite the conservative estimate, China was an outlier.China’s economic rebound was driven by a combination of factors, including massive investment in infrastructure and real estate, export booms boosted by the strong global demand for medical supplies, medical equipment, and electronics, and the steady pick-up in domestic consumption after a long period of sluggish growth.

Compared with the weak base in 2020, many analysts expect China’s economic growth will reach around eight to nine percent in 2021.China’s return to economic normality could mean policy normalization this year. But a balance will need to be struck by top policymakers between restarting economic reforms and not killing growth.

In the recent Central Economic Work Conference, top policymakers were cautious about making major changes to the country’s stimulus policies and pledged to maintain continuity in macroeconomic policies in 2021.Recently, the State Council extended measures on allowing small and micro-sized enterprises to defer loan repayments; two ministries required small-value government procurement projects to be entirely commissioned to small and medium-sized enterprises (SMEs). These are signs that national leaders think that full recovery is not yet completed and they will continue to support small businesses and stabilize employment.

On January 6, China’s central bank outlined key policies in 2021, saying that it would implement a prudent monetary policy that is flexible, precise, reasonable, and moderate. Policies on inclusive loan repayment extension and credit loan support program for small business will be prolonged. At the same time, the central bank will channel more financial resources toward green development and promote opening-up in the financial sector.

On the other hand, China is starting to re-emphasize the “high-quality development” of its economy, which implies the revival of its ambitious economic reforms – supply-side reform and the recently proposed demand-side reform are back on Beijing’s policy agenda.

In addition to eliminating excess and backward production capacity, de-leveraging the economy, and moving up the value chain, China is planning to shift some of its focus on reforms on the demand-side, after COVID-19 left many lower income Chinese consumers without financial cover and further widened the gap between the rich and poor.