PROSPECTS FOR STEADY RECOVERY

A new type of homemade shield machine is assembled at China Railway Group's production base in Zhejiang Province on January 4，2021．（VCG）

“China is the only major economy in the world expected to have achieved positive growth in 2020，”said Fu Linghui，spokesperson of China's National Bureau of Statistics（NBS），at a press conference on China's economic performance in November.

According to the latest NBS figures，three key economic indicators show that the Chinese economy has resumed steady positive growth．From January to October，total profits of industrial enterprises above designated size（with annual revenue from principal business of over 20 million yuan）was more than 5 trillion yuan（US$772 billion），up by 0.7 percent year on year，the first positive growth in 2020．During the same period，revenues of service enterprises above the designated size grew by 0.3 percent year on year，the first positive growth in the year．Specifically，revenues involving information transmission，software，and information technology services grew by 13 percent．From January to November，private investment was up 0.2 percent，positive growth for the first time of the year.

The “troika”of China's growth drivers—consumption，investment，and export— all registered positive growth，with consumption and fixed asset investment continuing to grow while growth of imports and exports was particularly eye-catching．In November，the total value of imports and exports of goods increased by 7.8 percent year on year，up by 3.2 percent month on month.

On the people's livelihood，in November，the surveyed urban unemployment rate was 0.1 percent lower than in October to near the rate of last year after dropping for four consecutive months．During the unprecedented pandemic，the Chinese economy has steadily recovered，which is benefitting global recovery．In foreign trade，China has clearly gained a global advantage with stable production and supply，according to Fu．China can contribute more to the global fight against the pandemic by fulfilling the needs of other countries while also importing more alongside gradual recovery of its domestic economy.

“China's economy will embrace many favorable factors next year，”Fu said，adding that it will likely gradually return to the potential growth level．The growth rate in 2021 could even be relatively high due to the low base in 2020，according to Fu.

Boosting Confidence

The steady recovery of the Chinese economy is good news for the world still beset by the pandemic.

“The world needs China more than ever，”opined Bloomberg Opinion columnist Daniel Moss．“Thank goodness it's showing up．The upbeat projections for a strong global rebound in 2021 depend on Beijing maintaining this momentum.”

Based on the latest data，Oxford Economics has raised its expectations for the Chinese economy with a forecast of GDP growth of 8.1 percent in 2021 from a previous estimate of 7.8 percent．Similarly，Goldman Sachs Group forecast China's GDP to grow by 2.4 percent in 2020 and 8 percent in 2021．Fitch Ratings also raised its expectations for China's economic growth from 7.7 percent to 8 percent in 2021.

“The impressive export growth in 2020，by helping to boost the V-shaped recovery in the domestic economy since the second quarter of 2020，has for the past couple of months reduced the government's need to ramp up infrastructure spending，”commented Lu Ting，chief China economist at Nomura Holdings，Japan's largest investment bank.

Louis Kuijs，head of Asia economics at Oxford Economics in Hong Kong，expects the Chinese economy to continue to accelerate in all areas．“We expect output to remain above-trend in the coming quarters，even as tailwinds from stimulus and exports start to ease，”he said.

Morgan Stanley and Nomura Holdings have both predicted the Chinese economy to grow by 9 percent in 2021．“China's new round of urbanization，represented by construction of the Guangdong-Hong Kong-Macao Greater Bay Area and smart cities，will become a new driver for economic growth，”opined Sun Wei Christianson，CEO of Morgan Stanley China．“When the pandemic ends，foreign investment will pour into China，further boosting its economic development.”

“It appears that once again，China is driving the global economy out of the trough，”said Margit Molnar，head of the China Desk of the Organization for Economic Cooperation and Development（OECD）．“In the past years China's contribution to global growth was 28-29 percent; the current one-third is a significant increase．The world is now more relying on China for growth.”

Further Deepening Reform

It has not been easy for the Chinese economy to achieve positive growth as the world economy has continued to struggle with the ravaging pandemic．Although all parties remain optimistic about the Chinese economy，factors of uncertainty persist such as weak international market demand，slow growth in domestic consumption，and the uncertain future of the China-US trade tensions.

“For the next stage，consumption will continue to be an important engine to support China's sustained and healthy economic development，”said Fu Linghui．On December 11，the Political Bureau of the Communist Party of China Central Committee held a meeting to analyze economic work for 2021 and determined that reforms on both supply and demand sides should be carried out so that demand and supply can boost each other．It was the first time demand-side reform was highlighted at this leadership meeting，which attracted considerable public attention.

Fu predicts that demand-side reform will help release consumption potential．The Chinese economy is now entering a new stage of development in which consumption is increasingly important in pushing growth．However，much room remains for using reform to improve the level and quality of China's domestic consumption and remove constraints impeding improvement of consumption capacity and the consumption environment.

Huang Qunhui，director of the Institute of Economics at the Chinese Academy of Social Sciences，noted that demand-side reform was highlighted against the backdrop of the new development paradigm of “dual circulation（with domestic circulation as the mainstay and domestic and international circulations reinforcing each other）.”

“The aim is to improve China's domestic demand system，not only the market system，but also the production system，income distribution system，and other systems，to ensure a dynamic equilibrium of supply and demand，”Huang said.

“Specifically，demand-side reform will include income distribution reform to strengthen the middle-income group and social security system reform to improve health care，education，and senior care and iron out consumption concerns and worries，”explained Feng Xuming，a researcher with Tsinghua University's Center for China in the World Economy．“It's also important to adapt to the trend of consumption upgrading to optimize the consumption environment.”

“China does not currently have enough consumer demand to boost economic growth，”commented Wang Xiaolu，deputy director and researcher of the National Economic Research Institute．“Investment demand is also relatively weak with a lack of effective investment space in most industries except a few emerging sectors．More government investment would only reduce efficiency and result in large sums of inefficient and ineffective investment.”In such circumstances，the only reasonable macro policy choice is to promote recovery of consumer spending by improving living standards and restoring the lead role of consumer demand in domestic consumption.

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From January to October，total profits of industrial enterprises above designated size was more than 5 trillion yuan（US$772 billion），up by 0.7 percent year on year，the first positive growth in 2020.
0.3％
During the same period，revenues of service enterprises above the designated size grew by 0.3 percent year on year，the first positive growth in the year.
13％
Specifically，revenues involving information transmission，software，and information technology services grew by 13 percent.
0.2％
From January to November，private investment was up 0.2 percent，positive growth for the first time of the year．