Chinese economy heads into 2021 amid high expectations

BEIJING (XINHUA) – The Chinese economy is expected to usher in 2021 with stronger recovery after surviving a triple whammy of COVID-19, economic slowdown and trade protectionism in an eventful 2020.

Standing at the forefront of epidemic control and resumption of work and production throughout this year, the world’s second largest economy has rebounded from the early lows to become the only major economy expected to achieve positive growth.

In the year ahead, a brand-new prospect will open up as the country is ready to implement its 14th five-year plan (2021-2025) and Long-Range Objectives Through the Year 2035.

The following aspects might offer a glimpse into the evolving Chinese economy in the ever-changing times.

As the country is on high alert for a new wave of COVID-19 this winter, starting to inoculate key groups including workers in the cold chain industry, customs, healthcare, markets and public transportation with COVID-19 vaccines, a massive lockdown is a highly unlikely event.

As a result, an attractive economic growth data set will be in the bag for the first quarter of next year, as the pandemic blow inflicted a 6.8 per cent contraction on the first quarter of this year.

Based on existing forecasts by international institutions, optimism will prevail throughout the year, with the International Monetary Fund (IMF) projecting an 8.2 per cent growth for the Chinese economy, and the World Bank, 7.9 per cent.

A labourer works at the construction site of Meizhou Bay cross-sea bridge of the Fuzhou-Xiamen high-speed railway in southeast China’s Fujian Province. PHOTO: XINHUA

Researcher with the Development Research Centre of the State Council Zhang Liqun predicted that tremendous domestic market potential will drive growth of above eight per cent next year.

Chinese authorities said they will manage to ensure that the economy continues to operate within a reasonable range, just as the recently concluded Central Economic Work Conference required.

A reasonable range means sufficient jobs and balanced supply-demand relationship, Zhang said, stressing efforts to expand domestic demand and sustain the current macroeconomic policy’s orientation and intensity.

While China has placed greater emphasis on the consistency and sustainability of its macroeconomic policy, targetted stimuli will not exit easily so as to boost consumption demand, enliven market entities, consolidate economic recovery and cope with new challenges.

“Endogenous driving forces such as personal consumption and manufacturing investment will be the major growth engines for China’s economy next year,” according to chief economist with Morgan Stanley China Xing Ziqiang. Xing projected that personal consumption growth will accelerate from minus one per cent in 2020 to 12 per cent next year, contributing 6.7 percentage points to gross domestic product (GDP) growth.

On further boosting domestic demand, analyst with Everbright Securities Gao Ruidong suggested that fiscal policy should play a more active role in optimising income distribution, increasing investment in technological upgrades in the manufacturing industry, and strengthening demand side management.

Macroeconomic policies need to be flexible, and appropriate adjustments should be made in line with economic development, said analyst with Merchants Union Consumer Finance Company Dong Ximiao. Some provisional measures might phase out if the economy recovers rapidly next year, he said.

Also, liquidity should be more precisely injected into key fields and weak links, Dong added, calling for more support for technological innovation, small enterprises and green development.

Next year will continue to see the country’s commitment to innovation, a major growth driver which was underlined at the recent Central Economic Work Conference.

Vowing to strengthen its national strategic technologies, China will make efforts to step up the formulation and implementation of a 10-year action plan to boost basic research, and plan a number of basic discipline research centres, according to the meeting.

While giving full play to the state’s role in organising major science and technology innovations, China will also maximise the principal role of enterprises in such innovations, supporting innovation activities of small and medium-sized firms.

Commenting on the country’s decision to encourage enterprise participation in innovation, Vice President of Tencent Yuan Min said the Chinese technology giant was strongly motivated and will step up efforts in basic research, strengthening its own innovation capabilities and initiating more innovation programmes.

In 2021, China is estimated to contribute more than one-third to global economic growth, according to a report by Organization for Economic Co-operation and Development (OECD).

Apart from its steady economic recovery, China’s contribution comes from its devotion to opening up at a higher level and creating a better business environment.

In November, China signed the Regional Comprehensive Economic Partnership (RCEP) agreement, which launched the world’s biggest free trade bloc. China also implemented the foreign investment law this year, and unveiled a much shorter negative list for foreign investors.

Despite uncertain factors in the external environment, China’s foreign trade of goods rose 1.8 per cent year on year in the first 11 months, while foreign direct investment into the Chinese mainland, in actual use, expanded 6.3 per cent year on year.

Foreign companies have remained confident in the Chinese market. A survey released by China’s Ministry of Commerce in July showed that some 99.1 per cent of the respondent foreign companies said their operations in the world’s second-largest economy will continue.

Tesla’s Global Vice President Tao Lin said this year’s economic work conference has convinced the electric car maker that investing in China is a correct decision, adding that Tesla is fortunate to be moving ahead with China’s steady economic recovery.

In the future, Tesla will continue to expand investment and be more integrated into the Chinese market, and contribute to building the new development paradigm, Tao said.