China says its financial system grew 2.three% in 2020, however shopper spending fell
Employees working on a dry-type transformer production line at a power generation factory in Haian, east China's Jiangsu Province, Jan. 4, 2021.
Stringer | AFP | Getty Images
BEIJING – China reported Monday that its economy grew 2.3% over the past year as the world battled to contain the coronavirus pandemic.
Gross domestic product rose 6.5% year over year in the fourth quarter, official data from the National Bureau of Statistics showed. These numbers exceeded analysts' expectations.
However, Chinese consumers continued to be reluctant to spend as retail sales fell 3.9% over the year. Retail sales increased 4.6% year over year in the fourth quarter.
The online sales of consumer goods rose relatively quickly by 14.8% in the past year, the statistics office announced, but the share of total retail sales remained relatively constant at around a quarter.
Economists expected China to be the only major economy to have grown over the past year, and forecast GDP growth of just over 2% in 2020. The people polled by Reuters expected economic growth of 6.1% for the fourth quarter and thus a faster growth than in the previous quarter of 4.9%.
The Chinese authorities have tried to increase the economy's reliance on domestic demand, rather than more traditional growth drivers like investment.
For 2020, consumption accounted for 54.3% of GDP, commissioner of the National Bureau of Statistics, Ning Jizhe, told reporters on Friday. That's less than 57.8% of GDP originally reported for 2019.
Bruce Pang, head of macro and strategy research at China Renaissance, predicts retail sales will pick up in 2021, rising by more than 10% from the subdued level of the previous year, also because consumers are spending excessive savings from 2020 onwards.
Effects of Covid-19
Covid-19 first appeared in the Chinese city of Wuhan at the end of 2019. To control the virus, Chinese authorities closed more than half the country and the economy contracted 6.8% in the first three months of 2020.
The coronavirus has surfaced again in parts of China this year. Hebei Province has reported an increase in Covid-19 cases since the beginning of the year.
Ning said the virus recurrence had increased uncertainty and attributed the decline in retail sales to coronavirus. Given China's experience last year, he presented the latest virus cases as controllable.
While some economic indicators exceeded expectations last year, others were not ideal, Ning said, noting that some of China's problems cannot be resolved in the short term.
China's economy returned to growth in the second quarter.
In late December, the National Bureau of Statistics cut China’s official growth rate for 2019 to 6.0% from the 6.1% previously reported. The cut came mainly in manufacturing as factories dealt with new US tariffs on Chinese goods valued at billions of dollars.