Beijing's ongoing campaign to rein in its shadow finance sector should win a cheer from institutions aiming at the China market. Photo: AFP/Getty

Empowered by a late-year surge, China’s economy grew at a surprising 2.3% for the year 2020, official data showed Monday.

The world’s number two economy is bouncing back after recording 6.5% growth, year-on-year, in the last quarter of 2020 – a figure that bodes well for China as it accelerates into the Year of the Bull.

The surprisingly solid performance suggests that the “workshop of the world,” as some call it, could also provide the globe with a racing economic engine as other economies stagger and judder into 2021.

China’s positive data was driven by an upturn in industrial production of 7.3% in the last month of the year, and an export surge that was underwritten by overseas demand for such pandemic-related items as personal protective equipment and electronic gadgets, according to financial newswire Bloomberg.  

Other factors behind the growth included the country’s effective Covid-19 containment measures and the deployment of fiscal and monetary stimuli to boost investment.

Beating expectations

The GDP numbers comfortably outpaced the forecast by an AFP poll of analysts from 13 financial institutions, whose consensus prediction had been for a 2.0% expansion. It also beat consensus predictions gathered by Bloomberg, who had anticipated a 2.1% increase.

In October, the IMF had expected China to grow 1.9%, while in September, the World Bank had anticipated 2.0%.

According to a Reuters poll, China will grow at 8.4% this year. If that proves correct, it will be the fastest pace in a decade.  

“The important aspect of this is that it was faster than expected growth,” a China watcher based in Hong Kong told Asia Times. “Obviously it is the slowest growth in decades – but no major country has done well in 2020.”

Given the ongoing third wave of Covid-19 that is wracking the societies and economies of Western Europe and North America, and also impacting East Asia with somewhat less force, China is likely to be the only significant global economy that will register positive macro numbers for 2020.

It’s not all milk and honey

Even so, by the standards China has become accustomed to as it accelerates its market economy and seeks to drag more rural citizens into its urban middle classes, the 2.3% expansion was hardly stellar. In 2019, the year before the Covid-19 pandemic shook China and the world, the country’s GDP had expanded by 6.1%.

And it was the lowest annual figure recorded since the Chinese economy embarked on major reforms in the 1970s.

Beijing’s National Bureau of Statistics (NBS) was not cracking any champagne. It cited a “grave and complex environment both at home and abroad” with the pandemic having a “huge impact,” according to AFP.

Major imbalances were also becoming apparent.

Industrial production grew 2.8% year-on-year for 2020, slowing further from previous years. While Beijing has talked up increasing local consumption and bolstered the talk with an ongoing tolerance for a strong yuan, retail sales fell 3.9% for the full year, AFP reported.