Chinese economy continues its pandemic bounce back

An employee works on the production line of gear wheel at a factory of Zhejiang Shuanghuan Driveline.

Key economic data in China surged dramatically in the first two months of 2021, pointing to a continued recovery for the world’s second largest economy.

China’s industrial output grew 35.1% in January and February compared to the same months last year. The strong numbers are distorted because they are compared to 2020, when most of China’s factories were in pandemic lockdown, but Monday’s slew of economic data still beat analysts’ expectations. Looking back to 2019 before the pandemic hit may give a more accurate picture of what is happening to economic activity in China.

Industrial output was up 16.9% compared with the first two months of 2019, highlighting the stronger output. A rebound in foreign demand has helped push export growth higher for China, often called the world’s factory. The Chinese government has set a modest annual economic growth target for 2021, at above 6%, even though analysts are tipping growth of around 8%. China was the only major economy last year to report positive growth, with an expansion of 2.3%. A spokeswoman for China’s statistics bureau Liu Aihua told reporters the economy should continue its recovery.

However, she said there are still imbalances in the economic recovery and that China needs to step up support for consumption. Retail sales, another key economic indicator, climbed 33.8% in the period, although the jobless rate was 5.5% at the end of February, up from 5.2% in December. Economists have pointed to a two-speed track for China, with strong industrial output and export demand but a lagging consumer recovery. The government imposed travel restrictions before the Chinese New Year holidays, which fell in February this year. This suppressed spending on travel, restaurants and leisure activities.

However, retail sales data showed the top growth items were jewellery (up 99%) and cars (up 78%). “These items tell us that Chinese consumers spent lavishly during the Chinese New Year holiday,” said Iris Pang, Chief Economist for Greater China, at ING bank.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s