China Economic Quarterly Q1 2021

Post COVID-19 pandemic, China’s GDP growth reached 18.3% in Q1 and average Q1 growth in two years of 2020 and 2021 was 5.0%.

This issue provides an overview of the macro-economic trends in Q1 2021, some policy updates and hot topic analysis.


Here are some macro-economic highlights:

  1. GDP growth increased by 18.3% in Q1
  2. Total fixed asset investment reached 9.6 trillion yuan and increasing by 25.6%
  3. Total real estate investment increased by 25.6% and reached 2.76 trillion yuan
  4. PMI in Q1 was slightly lower than in Q4 2020
  5. The growth of industrial added values increased by 24.5%
  6. Total retail sales of consumer goods increased by 33.9% to 10.5 trillion yuan
  7. Imports and exports increased by 29.2% and reached 8.47 trillion yuan
  8. PPI increased by 2.1% and CPI remained the same compare to Q1 last year

Policy updates

Total aggregate financing to the real economy increased by 10.24 trillion yuan in Q1
According to the People’s Bank of China (PBoC), total aggregate financing to the real economy (AFRE) increased by 10.24 trillion yuan in the first quarter, a reduction of 0.87 trillion yuan from the same period of 2020. As a result, total outstanding AFRE reached 294.55 trillion yuan by the end of Q1, up 12.3% year-on-year and 0.8% more than in Q1 2020. 

Fiscal revenue grew by 24.2% while fiscal spending increased by 6.2%
In the first quarter, on the back of strong economic recovery, the national public budget revenue grew by 24.2% year-on-year to 5.71 trillion yuan. Average Q1 growth rate in two years of 2020 and 2021 was 3.2%. It increased by 6.4% compared to Q1 2019. Meanwhile, national public budget expenditure went up by 6.2% to 5.87 trillion yuan in Q1 this year.

Hot topic analysis: How much will carbon neutrality contribute to China’s economic growth before 2060?

In September last year, President Xi Jinping announced at the 75th United Nations General Assembly (UNGA) that China would strive to peak out its carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060. Although there are great challenges and difficulties, perhaps it is the only way for the country to achieve sustainable development. Throughout the transformative process, hundreds of trillion yuan worth of investments will drive the green and low-carbon transformation in many sectors, including the energy system. All in all, achieving carbon neutrality will have a far-reaching impact on China’s medium and long-term economic development.

Implications and opportunities

  • Given its current stage of development, China will face great challenges on the road to carbon neutrality. This is largely due to the economic foundation as a developing country that involves a high proportion of coal in the energy consumption structure, as well as continued efforts in expanding urbanisation and industrialisation. These would create great future demand for steel, cement, automobiles and other industrial products that entail high carbon emissions.
  • Carbon neutrality will become an important driving force behind the sustainable development of the country’s economy in the next four decades. It will contribute to more than 2% of the annual average GDP growth, and channel investments of more than RMB 120 trillion to the energy sector and up to RMB 400 trillion to related sectors.
  • The top priority of carbon neutrality lies in the energy sector. The most dominant category in the energy consumption structure will be shifted from fossil energy (coal, oil and natural gas, now accounting for about 70% of China’s energy consumption) to solar energy, wind energy, hydropower, nuclear energy, hydrogen energy and other clean energy.
  • The process of achieving carbon neutrality will bring huge impacts to many sectors such as transportation, construction, industry, agriculture, and new materials.
  • The influences of achieving carbon neutrality on China’s economic development might be no less than that of urbanisation or accession to the World Trade Organisation (WTO).

Contact us

Elton Yeung

Vice Chairman, PwC China

Tel: +[86] (10) 6533 8008

Thomas Leung

Managing Partner - Markets, PwC China

Tel: +[86] (10) 6533 2838 / +[852] 2289 8288

Elton Huang

China Tax Leader, Central China Markets Leader, Shanghai Office Lead Partner, PwC China

Tel: +[86] (21) 2323 3029

G. Bin Zhao

Senior Economist, PwC China

Tel: +[86] (21) 2323 3681

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