China's GDP forecast to grow by more than 20 PER CENT in Q1

China’s GDP is expected to grow by more than 20 PER CENT in the first quarter – it’s largest increase in DECADES – as world slowly recovers from Covid-19

  • China forecast to see huge year-on-year rise in GDP in Q1, which could top 20%
  • If confirmed tomorrow, then it would mark the steepest rise in at least 30 years 
  • Comes as much of global economy remains in tatters due to Covid pandemic 
  • Japan, Germany, UK and India all expected to see economies shrink in Q1 

China’s economy likely grew at a record pace in the first quarter of this year and may have expanded more than 20 per cent year-on-year, economists have said.

If the data is confirmed – with the National Bureau of Statistics due to report Friday – then it would mark the largest rise since at least 1993, when Chinese records began. 

It comes as much of the global economy remains in tatters due to the Covid pandemic which began in Wuhan in 2019, with German economists saying today that their GDP is likely to shrink by 1.8 per cent in the first quarter.

A graph showing China’s year-on-year GDP growth figures, with Q1 projected to be more than 20 per cent – which would be the highest rise on record

China was the only major world economy to report growth in 2020, with others crippled by the effects of Covid lockdowns 

Economists believe Japan and India are likely to see a fall in GDP in the first quarter, with the UK economy also forecast to contract by around 2 per cent in Q1.

American GDP is set to grow in the first quarter, according to Morgan Stanley, but only by around 8 per cent – less than half the rate of China.

But forecasters have urged caution around figures out of Beijing because they come off the back of a record 7 per cent contraction in 2020 – making this year’s figures appear much better by comparison, a so-called ‘low base’ effect.

‘We expect a strong bounce back in Q1 GDP this year, mainly driven by the low base in Q1 2020, but also due to higher exports and improving domestic demand,’ said Raphie Hayat, Senior Economist with Rabobank.

‘This will moderate later in the year, but we still expect China to easily beat its growth target of ‘above 6 per cent’ for 2021.’ 

China was the first country in the world to mount a large-scale response to Covid after the disease emerged in Wuhan late in 2019, putting in place strict lockdown measures and closing the borders.

While a lot of doubt has been placed on Chinese data, particularly in the early stages of the pandemic, these measures are widely thought to have brought cases down to near-zero at the current time.

As a result, China has been able to reopen its economy faster than other world nations – many of which are still crippled by repeated lockdowns as cases rise.

A demand for Chinese goods, particularly mass-manufactured PPE and vaccines, has also helped to kick-start its economic recovery.

As a result, China posted economic growth of 2.3 across the whole of 2020, making it the only major world economy to grow at all that year.

Covid is widely thought to have originated in the city of Wuhan, in Hubei province, some time around or shortly before December 2019 – although a WHO probe into its origins has failed to uncover precisely how it first crossed into humans.

Scientists believe the original host animal, likely a bat, passed the virus on to a second animal which more-frequently comes into contact with people, which is where the ‘spillover event’ took place.

That event may have taken place at the Huanan Seafood Market in Wuhan, the researchers said, where a cluster of early cases took place – though some had no links to the market, meaning a link cannot be conclusively proven. 

The researchers have dismissed a theory that the virus leaked from a coronavirus research lab in Wuhan which was carrying out controversial research into the diseases, saying it is ‘very unlikely’.

But their conclusions have proved controversial, with critics saying they relied too heavily on data fed to them by Beijing.

Even Tedros Ghebreyesus, director of the WHO, has urged further study into the lab leak theory, saying it is too early to conclusively rule it out.  

While China has managed to reduce its own Covid cases near-zero and reopen its economy, the rest of the world is still seeing surging cases (pictured, a hospital in India)

China will release first-quarter gross domestic product data on Friday, along with March factory output, retail sales and fixed-asset investment.

Separately, the poll also showed economic growth for 2021 is expected to be 8.6%, quickening from the previous year’s 2.3% pace to the strongest performance in a decade, and slightly higher than January’s forecast of 8.4%.

Growth is then expected to moderate to 5.5% in 2022, reflecting global economic normalisation and China’s long-term slowing economic trajectory due to structural and demographic changes.

Growth rates will likely slow as comparisons with virus-hit 2020 fade, analysts at UBS said in a note.

‘We continue to expect domestic consumption to rebound to 10% in real terms and nominal export growth to pick up to 16%, both of which could help support corporate capex recovery and more than offset the expected moderation in property activities and infrastructure investment.’

With the economy back on more solid footing, the People’s Bank of China (PBOC) is turning its focus to cooling credit growth to help contain debt and financial risks, but it is treading cautiously to avoid derailing the recovery, analysts said. Policymakers have vowed no sudden policy shift.

Authorities are especially concerned about financial risks involving the country’s overheated property market, and have asked banks to trim their loan books this year to guard against asset bubbles.

China has set an annual economic growth target at above 6% this year, below analysts’ expectations, giving policymakers more room to cope with uncertainties.

The PBOC is unlikely to raise interest rates this year, the poll showed, despite rising market fears over tightening.

Analysts expect China will keep its one-year loan prime rate (LPR) steady at 3.85% until the end of 2021. The LPR has remained unchanged since May 2020.

Banks’ reserve retirement ratios (RRR) is expected to be unchanged at 12.5% through out the year.

The poll also predicted no change to the benchmark deposit rate until the end of 2021. The PBOC has kept it steady at 1.5% since October 2015.

Consumer inflation will likely to slow to 1.6% in 2021 from 2.5% in 2020, but it could pick up to 2.3% in 2022, according to the poll.

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