05 Apr China’s economy after Chinese New Year
February is an important month for Chinese in 2021. It is the month with China’s most important festival – Spring Festival. China’s consumer market is recovering strongly at the beginning of the new year, but the growth rate of imports might exceed that of exports in 2021.
Despite the impact of COVID-19 turned on the “pause button” on China’s economy in early 2020, Chinese government gave the respond on epidemic quickly and controlled the virus spread well, the economy of China recovered quickly compared to the rest of world. The total GDP exceeded 100 trillion yuan a year, and its growth rate reached 2.3% in 2020. After entering 2021, China’s economic indicators continue showing the strong growth trend. According to the official data, during the Spring Festival holiday in 2021, the amount of UnionPay transactions in China’s consumer market exceeded 1 trillion yuan, with a total amount of 1.18 trillion yuan, which was a record high for the Spring Festival over years. Among them, the sales revenue of wholesale and retail industry increased by 27.9%; clothing, shoes and hats increased by 31.1%; high-end consumption, jewellery consumption increased by 18.8%; cosmetics and sanitary products increased by 38.4%; stationery and other cultural goods increased by 20.2%; meat, poultry, eggs and milk and other necessities increased by 10.6%. From all these data, we can see that China’s consumer market is recovering strongly in the new year.
From the perspective of import and export situation, export performed better than import in 2020. In 2020, China’s total import and export value of goods trade was 32.16 trillion yuan, up 1.9% YoY. Among them, export was 17.93 trillion yuan, up 4.0%; import was 14.23 trillion yuan, down 0.7%. The top five trading partners were ASEAN, EU, the United States, Japan and South Korea. Due to the time difference of the COVID-19 outbreak between China and rest of world, China’s economy returned to the normal track in the second half of 2020, while the overseas epidemic situation became getting worse at that time. Due to the restriction of various economic and production activities overseas, a large number of goods had to be imported from China, resulting in China’s export data reaching a new high record. However, the overseas epidemic also restricted exports to China, resulting in a slight decline in China’s total annual imports. However, if we check the monthly data, we can see China’s import data has shown signs of improving month by month. The data in the fourth quarter was especially well. Imports in December increased by 6.5%, 2 percentage points higher than that in November.
From our analysis, the growth rate of imports is expected to be greater than that of exports in 2021. After entering 2021, although the imports and exports data of January 2021 has not been released, according to the survey of various industry sectors, the import data in January is expected to be better than that in December, and the annual import growth rate is also expected to be higher than that of export. The reasons are as follows:
1. The demand driven by China’s economic growth momentum is still good. From the perspective of production, the PMI of manufacturing industry has been above 51% for seven consecutive months, which indicates that manufacturing activity is still expanding. Most economic indicators show that the economy continues growing and it will support the demand.
2. The overseas epidemic situation has gradually and effectively controlled. The number of new infected cases in the United States is decreasing day by day. Vaccines in major economies are gradually being popularized to the whole population. Overseas economic production activities are gradually recovering. The interruption of exports to China last year is expected to be stopped, which will guarantee the supply of goods.
3. In terms of trade environment, the first phase of China- US trade agreement is still in progress, and China’s strong import demand for the United States has boosted the overall import. In December, the growth rate of China’s imports from the United States was as high as 47.7%, while the growth rate of China’s imports from non US regions rose by 1.1% to 3.9%. On the other hand, with the recovery of economic activities in major overseas countries, China’s export growth rate may maintain a small growth in 2021, and the growth rate may be weaker than that of import.
At the beginning of 2021, China economy showing a strong growth trend. Under the background of the Chinese government’s emphasis on maintaining the sustainability of macroeconomic policies and not making a sharp drop, the annual economic growth is expected remain high, and we expect to see the consumer market in 2021 will further recover from the low base in 2020. In addition, with the gradually control of COVID-19, overseas economic activities will recover. At the same time, major economies still emphasize that the short-term quantitative easing policy will not exit. We expect to see China’s import and export situation in 2021 will be significantly better than last year, and the growth rate of import is expected to be higher than that of export.