Already the world’s largest exporter, China’s exports increased by 3.6% in 2020, according to official data.
Photographer: Qilai Shen / Bloomberg
Photographer: Qilai Shen / Bloomberg
China’s economic growth is accelerating only a year after the first coronavirus blockages, as its success in controlling Covid-19 allows it to increase its share of global trade and investment.
The world’s second-largest economy is set on Monday to report that gross domestic product rose 2.1 percent in 2020, the only major economy to have avoided a contraction, according to a Bloomberg survey of economists.
This should ensure its share of the world economy has grown at the fastest pace in this century. World production fell 4.2 percent last year, according to the World Bank, pushing China’s share to 14.5 percent in 2010 dollar prices – two years earlier than expected.
With all the strength ahead
China’s share of the global economy is expected to grow at a faster pace
Source: IMF, World Bank, McKinsey & Company
And it’s not just a blip that will reverse once other big savings start to recover as vaccines are launched. Economists expect China’s GDP to expand 8.2% this year, continuing to surpass global counterparts, including the US
China is now on its way to the US as the largest economy in 2028, said Homi Kharas, deputy director for the global economy and development program at the Brookings Institution, two years faster than previously estimated.
After resisting President Donald Trump trade war, China deepens economic ties in Asia and Europe and looks at domestic consumption to fuel its next phase of growth. President Xi Jinping said this week that “time and situation” are on the side of the country in a new year marked by internal unrest in the US
Read more: Upbeat Xi tells time on the Chinese side, while turbulence prevents us
If its local success in controlling the virus continues, the pandemic could help China “strengthen its position in the global economy,” said Ka Zeng, director of Asian studies at the University of Arkansas. US and European companies are likely to focus more on China due to “the potential for the country to be the only major source of growth in the post-pandemic world.”
The record jump in China’s share of global GDP was just one of many milestones for its economy last year:
- The economy was converging with the United States at the fastest pace. China’s GDP was 71.4% compared to the US level in 2020, according to the International Monetary Fund, up 4.2% from the previous year
- The share of world trade has increased as pandemic exports increase. Already the world’s largest exporter, China’s deliveries increased by 3.6% in 2020, according to official data. Total world trade probably contracted by 5.6%, according to United Nations Trade and Development Organization UNCTAD estimates
- China has likely regained the title of the world’s top foreign investment destination, which it lost to the United States in 2015. Foreign investment in China reached more than $ 129.5 billion by November 2020, just over the previous year. Globally, FDI flows are likely to have decreased by 30-40% compared to the previous year in 2020, according to UNCTAD
- Fortune Global 500 The list of largest companies in the world by revenue contained for the first time more companies based in China, including Hong Kong, than in the USA: 124 vs.. 121
- Box office receipts all year round surpassed the US for the first time
- The sovereign debt was added to the Russell FTSE benchmark, completing the country’s inclusion in all three of the world’s top bond indices. Foreign investors bought 1.1 trillion yuan ($ 170 billion) of Chinese bonds in 2020
China’s increased role in a post-pandemic world enhances the urgency of the debate among the rest of the world on how to interact with Beijing. While the Trump administration has levied tariffs and restricted access to key technologies, other countries have sought closer trade and investment ties.
Fifteen Asian countries, including China, have signed the Comprehensive Regional Economic Partnership pact in November, vowing to reduce trade barriers in the region. In December, the European Union agreed on a comprehensive investment agreement with China.
“Countries will have to deal with a bipolar world rather than a unipolar world,” said Bo Zhuang, chief Chinese economist at TS Lombard.
What Bloomberg Economics says …
“Not only China’s growth, but also its growth model is important for the global economy. China continues to strive to move by greater dependence on consumption for growth. For the rest of the world, China will become more and more a consumer in addition to the role of producer that it has played for a long time. ”
– Chang Shu, chief economist in Asia
China’s leaders usually downplay economic stages, such as its economic output, which surpassed that of Japan in 2010, for fear of scaring those already paying attention to its rise. However, Beijing announced this year that it will aim GDP double the levels from 2020 to 2035, a goal that involves moving towards number one.
However, there is no guarantee that it will happen. China has proven to be wrong with pessimists in 2020, but faces huge challenges since worsening relations with the US that could limit the potential for access to technology, an over-reliance on debt-financed investments and a rapidly aging population.
Read more: Here’s how fast the Chinese economy catches on Up to US
China’s role as a factory for the world was enhanced last year as it expanded face masks, medical equipment and home work equipment. While political leaders, such as France’s Emmanuel Macron, have vowed to produce more at home in the wake of the pandemic – repeating US rhetoric about China’s “decoupling” – any change in diversification of production will be gradual due to the high costs involved.
Stronger recovery
China’s economy has grown more this year, although others are stagnating
Source: National Bureau of Statistics, Bloomberg polls
Multinational companies have another reason to stay or even add to their investments in China: the rapidly growing consumer market, which is already eclipsing the US and Western Europe in some sectors.
China now accounts for a quarter of the global middle class, defined as the population that spends between $ 11 and $ 110 per person per day in terms of purchasing power parity since 2011, a stage that “would not have been reached for two more years if Covid -19 would not have had It didn’t happen, “said Kharas of the Brookings Institution.
Both General Motors Co and Volkswagen AG continued they sell more cars in China than in their home markets last year. Starbucks Corp. plans to open about 600 new stores this year, while Nike Inc. reported sales in China of $ 2 billion for the first time in the quarter ended in November.
“We watched wave after wave of pandemics that hit different markets,” said Matthew Friend, Nike’s chief financial officer, in a December investor call. “And really, the only market we’ve seen a kind of continuous trajectory in terms of virus management has been China.”
“With the assistance of James Mayger.”
(Updates with details on bullet point bond purchases.)