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16 Apr 2021

International Economy

Chinese economy in 1Q21 grew 18.3 percent YoY, its highest growth in 29 years, thanks to a low base in the previous year. Full-year 2021 still projected to grow by 8.0-8.5 percent. (Current Issue No.3922)


China's economy in 1Q21 grew  18.3 percent YoY, sharply higher than 4Q20 which saw 6.5 percent growth YoY, setting the highest quarterly year-on-year growth in  29 years since China began to publish such data in 1992. This surge was primarily attributed to a low base in 1Q20, during which China's economy shrank by 6.8 percent YoY. On a QoQ basis, which may better depict the present economic growth, China's economy grew by a mere 0.6 percent due to the fragility of private consumption, the uneven recovery of the manufacturing sector and investment in each industry, and the overall exports, which remain under pressure from the fragile global economic recovery.


The service sector that is related to private consumption continued to exhibit steady growth, but remains lower than the pre-pandemic period. This is reflected through retail sales  in 1Q21 which grew by 33.9 percent YoY. On average, retail sales for 1Q21 grew 4.2 percent, YoY, a level which is lower than in the pre-COVID-19 era (with average growth of 8.04 percent in 2019). On the other hand, China's manufacturing sector has enjoyed consistent growth albeit at different rates for each industry, driven by increased utilization of advanced technologies in the manufacturing sector. This is reflected in the added value of machine-based production and high-tech manufacturing, which rose by 39.9 and 31.2 percent YoY, respectively. Notable examples include the production of alternative fuel vehicles, and microcomputer-driven robots and integrated circuits. Meanwhile, fixed asset investment saw slow recovery, especially in  traditional industries (such as investment in basic infrastructure, manufacturing and real estate), However,  exponential growth has been seen in industries that have adopted high technology and those related to people's quality of life (such as investment in health and education). On the whole, fixed asset investment grew at a rate of 25.6 percent YoY in 1Q21, or 2.06 percent growth QoQ. At the same time, China's overall exports continued to grow due to the low base from the same period of the previous year. However, the total export figure remained lower than that of the previous quarter. China's exports in 1Q21 expanded at 48.81 percent YoY, and its imports rose by 27.62 percent YoY. On a QoQ basis, however, exports declined 9.8 percent , while imports increased a 3.1 percent. Notably, China's exports to the United States showed the highest growth at 61.3 percent YoY in spite of the ongoing trade war.

With regard to China's economic outlook in 2021, KResearch maintains its projection of China's full-year economic growth within the range of 8.0-8.5 percent. Although China's economy in the first quarter of 2021 may have risen beyond expectation primarily from a low base effect, its growth trend over the forthcoming period continues to be fraught with risks revolving around the progress and effectiveness of vaccination efforts[1],  potential risk posed by the emergence of new coronavirus strains, the geopolitical risk presented by the tension between China and the United States which shows no sign of resolving even in the era of President Biden, as well as the issuance of additional retaliatory trade measures against China by its trade partners. For these reasons, these economic indicators are subject to high volatility. Amid multiple challenges, the Chinese government still has ample tools and resources especially monetary and fiscal measures to sustain its economic growth for this year to be close to prior projections .

[1] Data as of April 10, 2021. The population of China has received a total of 164.5 million doses, which is arguably far from its target of 560 million vaccinations, or approximately  40 percent of the population within June 2021, and encompassing 70 percent of the population to achieve herd immunity by December 2021. 

International Economy