This issue provides an overview of the macroeconomic trends in Q4 2020, some policy updates and hot topic analysis.
Here are some macro-economic highlights:
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%.
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?
China Tax Leader, Central China Markets Leader, Shanghai Office Lead Partner, PwC China
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