China Economic Quarterly Q4 2020

China’s GDP growth reached 6.5% in Q4 and 2.3% in 2020 overall, but consumption might be still weak in the first half year of 2021 due to the COVID-19 pandemic.

This issue provides an overview of the macroeconomic trends in Q4 2020, some policy updates and hot topic analysis.

Highlights

Here are some macro-economic highlights:

GDP growth increased by 6.5% in Q4 and 2.3% in 2020
Total fixed asset investment reached 52 trillion yuan and went up 2.9% in 2020
Total real estate investment increased by 7.0% to 14 trillion yuan in 2020
PMI remained relatively strong in Q4 of 2020 relative to Q2 and Q3
The growth of industrial added values increased by 2.8% in 2020
Total retail sales of consumer goods reduced by 3.9% in 2020
Imports and exports increased by 1.9% in 2020
PPI decreased by 1.8% and CPI went up 2.5% in 2020

Policy updates

Total aggregate financing to the real economy increased by 34.86 trillion yuan in 2020

According to the People’s Bank of China (PBoC), total aggregate financing to the real economy (AFRE) increased by 34.86 trillion yuan in 2020, which was 9.19 trillion yuan more than in 2019. As a result, total outstanding AFRE reached 284.83 trillion yuan by the end of December, and increased by 13.3% year-on-year, which was 2.6% more than in 2019.

Fiscal revenue declined by 3.9% while fiscal spending increased by 2.8%

In 2020, the national public budget revenue reduced by 3.9% to 18.29 trillion yuan and national public budget expenditure increased by 2.8% to 24.56 trillion yuan. By the end of 2020, local government debt reached 25.66 trillion yuan and central government debt reached 20.89 trillion yuan. Total public debt (46.55 trillion yuan) accounted for 45.8% of China’s total GDP (101.6 trillion yuan) in 2020. Therefore the public debt-to-GDP ratio was much lower than the prudential limit of 60%.

Hot topic analysis: Would COVID-19 affect China’s consumption in the first half year?

According to the National Bureau of Statistics, total retail sales of consumer goods reached 39.2 trillion yuan and declined by 3.9% in 2020. As a result, final consumption expenditure reached more than 55 trillion yuan and accounted for 54.3% of total GDP (101.6 trillion yuan) in 2020. It pulled down GDP by 0.5% during the year. While in 2019, final consumption expenditure accounted for 57.8% of total GDP (98.65 trillion yuan).

The recovery of consumption will be critical for China’s economic expansion in 2021. With the pandemic continuing to impact many countries, as well as strict control policies in place in China, could COVID-19 affect China’s consumption in the first half of 2021?

Facts

According to the National Bureau of Statistics, total retail sales of consumer goods reached 39.2 trillion yuan and declined by 3.9% in 2020.
China’s per capita consumption expenditure declined by 1.6% to 21,210 yuan in 2020. In real terms, the drop in expenditure was even more significant at 4%.
Looking at nationwide per capita expenditure by category, only food and housing expenditure increased in 2020. All other categories of expenditure recorded reductions.

Implications and opportunities

The recovery of consumption will be critical for China’s economic expansion in 2021.
Current domestic prevention and control measures as well as the pandemic situation in other countries might impact household consumption in the next six months.
Policy measures to stimulate household consumption may still be needed in the first half of 2021, in order to stabilise economic growth.

Find out more about hot topic analysis