Daily Management Review

China becomes the only major economy to show growth in 2020


The recovery of the Chinese economy accelerated in October as fiscal support increased, as evidenced by the latest macroeconomic data from the National Statistics Office of China.

Mstyslav Chernov
Mstyslav Chernov
China's GDP has already grown 4.9% year on year in the third quarter, outperforming growth in the second quarter of 3.2% (the first quarter saw a decline of 6.8%). The result was a positive 0.7% for the first nine months compared to the same period last year. Thus, the Chinese economy is likely to be the only major economy to have shown growth this year. The International Monetary Fund predicts that it could reach 1.9% and accelerate to 8.2% next year.

In October, industrial production in China grew by 6.9 per cent year-on-year, the same as a month earlier. At the same time, the key industrial goods output index increased from 5.8% to 8.7%. Capex increased by 9.3 per cent compared to 7.6 per cent in September, while infrastructure investment was again the main driver: its growth accelerated from 4.6 per cent to 7.5 per cent (by the end of the year regional governments are seeking to spend the funds raised through the issuance of bonds). Production companies' capital expenditure increased by 3.5% (3% in September), while real estate investment increased by 12.2% (11.9% a month earlier).

Consumption has also improved, with retail sales accelerating from 3.3% to 4.3%, which is already in line with pre-pandemic rates. Growth in the service sector was also record-breaking for 18 months (7.4% vs. 5.4%). At the same time, the unemployment rate fell from 5.4% to 5.3% (the rate is also now only 0.1 percentage point higher than at the end of last year).

"The statistics show that the negative shock to the labour market and the service sector is now completely behind us, and consumption may continue to strengthen given the savings accumulated since the beginning of the year," says Capital Economics. At the same time, the fiscal stimulus policy will support activity in the industrial and construction sectors: as a result, in the coming quarters there will be an increase above the trend, the centre notes.

source: capitaleconomics.com