China becomes first major economy to bounce back to pre-Covid growth

China’s economy grew by 2.3 per cent in 2020, new figures show, making it the world’s only major economy to expand last year after the financial damaged caused by coronavirus.  

The numbers, announced in Beijing by the country’s National Bureau of Statistics (NBS) on Monday, were facilitated by a “significant acceleration” over the last three months of the year – outperforming even analysts’ forecasts.

Despite this, the growth was China’s lowest annual sum since its economy shrank by 1.6 per cent at the end of the Cultural Revolution in 1976.

Still, ending 2020 on a financial high seemed out of the question for China this time last year when Covid-19 emerged in the central city of Wuhan. China’s economy – the world’s second largest behind the US – suffered its first draw back in almost half a century when coronavirus shrunk it by 6.8 per cent in the January-March period compared with 2019.

Becoming the first country to get the virus mostly under control helped the economy to improve steadily, resulting in the year finishing with growth of 6.5 per cent in the last three months of 2020 – higher than analysts’ forecast of 6.2 per cent – again compared to the same period in 2019.  

While expansion remains slow, these figures suggest not only that China’s economy is steadily bouncing back but that it actually achieved better growth at the end of last year than it did pre-Covid. In 2019, the country’s economy grew by 6 per cent in the last three months – 0.5 less than it did in 2020, according to the NBS. 

Ning Jizhe, head of the NBS, said on Monday that “the main targets of economic and social development [in 2020] have been completed better than expected”.

“China is expected to become the only one major economy in the world to achieve positive economic growth throughout the year,” he said, adding that quarterly GDP growth had now “returned to the normal level”.

In stark contrast, the US, Japan and many nations in Europe are expected to report significant drops in economic output. Though neither have confirmed their annual growth rates for 2020 yet, Investopedia has the US at 2.2 per cent and the UK at 1.5 per cent.  

The struggle is by no means over for China, though. Continuing Covid outbreaks could “hamper” its first quarter annual growth, experts have said.  

“Following new government restrictions amid Covid-19 outbreaks in two provinces, reduced confidence and travel during the Chinese New Year holidays in February could hamper first quarter growth,” Louis Kuijs, Asia Pacific analyst at Oxford Economics, said.

“But, at least for now, we think the risk of major economic impact is low, given China’s track record of containing outbreaks.”