Overview

• According to official national accounts data, China’s economy grew by 2.3% in 2020 – its weakest rate of growth since the end of the Cultural Revolution in 1976. A downward revision to growth in 2019 – to 6.0% (from 6.1% previously) – helped add some additional strength to the full year growth rate. It is worth noting an inconsistency between the annual and quarterly data – with the sum of quarterly growth rates suggesting slightly slower annual growth (at around 1.9%).
• We expect quarterly growth momentum to slow across 2021, however year-on-year growth will be boosted in Q1 due to base effects – given the scale of the downturn in Q1 2020. For the full year, we expect growth of 9.5%.
• Growth in China’s industrial production accelerated in December, increasing by 7.3% yoy (up from 7.0% yoy in November). It is worth noting that industrial production has grown more rapidly than its pre-COVID-19 rates in recent months.
• There was a noticeable slowdown in fixed asset investment growth in December – with real investment rising by 6.5% yoy, down from 11.4% yoy in November. Investment by state-owned firms slowed considerably in December.
• China’s trade surplus continued to widen in December, resulting in a fresh record high. The surplus totalled US$78.1 billion (up from US$75.4 billion in November) as exports rose rapidly month-on-month, compared with a slightly more modest increase in imports. The largest share of China’s trade surplus remains with the United States, which could reignite trade tensions between the two countries.
• Compared with strength in the industry sector, the recovery in consumption has been relatively soft. Real retail sales increased by 4.9% yoy, down from 6.2% yoy in November. This was around the levels seen pre-COVID-19 that had been weakened by the US-China trade war.
• New credit issuance totalled RMB 34.9 trillion in 2020, an increase of 35.8%. Bank loans accounted for the majority of the total – at RMB 20.2 trillion, however bank lending grew comparatively slowly, up by 20.4%. Non-bank lending was driven by corporate and government bond issuance, rather than shadow banking.
• Chinese authorities appear to moving to unwind support – given medium-to-longer term risks due to high debt levels in the corporate sector. Regulators have announced new restrictions on bank lending to the property sector, which may constrain funding for new property developments going forward.

For further details, please see China’s economy at a glance – January 2021.