The economy of China in the fourth quarter
of 2020 grew by 6.5%YoY, amounting to full-year growth that exceeded projections,
at 2.3% YoY. The figures reflect China's success in efficiently controlling the
COVID-19 pandemic and implementing both monetary and fiscal stimuli in a timely
and effective manner. KResearch projects that China's economy in 2021 will
resume its growth in the range of 8.0-8.5%YoY, supported by the recently
revived and continuous consumption in the country's private sector. The
improvement is attributable to the rising purchasing power of the Chinese
middle-class, which currently numbers around 400 million people, and increasing
per capita income (PCI) as a result of higher skills and efficiency in the
workforce along with other measures issued by the government to stimulate
consumption.
Economic growth in 2021 will be markedly
different, with a shift in emphasis from short-term impetus to mitigate the
COVID-19 crisis to that of long-term qualitative growth which involves
investment in the population's quality of life, investment in the development
of new basic infrastructure and application of new technologies for long-term,
sustainable development as a way of strengthening a circular economy alongside
the promotion of external sectors. Amid a slowdown in Chinese businesses'
investment in traditional industries and uncertainty surrounding the export
market, investments within industries related to new technologies by the public
and private sectors will serve as the main driver of China's economy in line
with China's “Dual Circulation" model as outlined in China's 14th
Five-Year Plan for National Economic and Social Development, which will be in
place from 2021 to 2025.
Although the Chinese economy in 2021 shows a
good growth trend, there are issues that need to be monitored, including the
balancing between short-term stimuli and long-term systemic risk from a high
level of private debt after injection of large amounts of money to increase
liquidity in the economic system, the uncertainty of the global economy, as
well as the geopolitical risk that may stem from competition between the US and
China.
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