According to official data, already the world’s largest exporter, Chinese exports are up 3.6% in 2020.
Photographer: Qilai Shen / Bloomberg
Photographer: Qilai Shen / Bloomberg
China’s economic rise is accelerating barely a year after the first blockage of the coronavirus, as its success in controlling Covid-19 allows it to increase its share of world trade and investment.
The world’s second-largest economy reports Monday that gross domestic product rose 2.1% in 2020, the only major economy to avoid a contraction, according to a Bloomberg poll of economists.
That should ensure that its share of the world economy rose the fastest this century. According to the World Bank, global production fell 4.2% last year, pushing China’s stock dollar prices up 14.5% by 2010 – two years ahead of expectations.
Full speed ahead
China’s share of the world economy is expected to grow faster
Source: IMF, World Bank, McKinsey & Company
And it’s not just a blip that will reverse once other major economies begin to recover while vaccines are rolled out. Economists expect China’s GDP to grow 8.2% this year, continuing to outpace international competitors, including the US
China is now on track to overtake 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 he previously estimated.
After President Donald Trump’s resisting trade war, China is deepening economic ties within Asia and Europe and looking to domestic consumption to spur the next phase of growth. President Xi Jinping said this week that “time and the situation” were on the side of the country in a new year marked by domestic unrest in the US.
Read more: Excited Xi says time on China’s side as turmoil grips the US
If the success of local virus control continues, the pandemic could help China “cement 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 because of the “potential for the country to be the only major source of growth in the post-pandemic world.”
The record jump in China’s global GDP share was just one of many milestones for its economy last year:
- The economy converged with the US at the fastest pace ever. According to the International Monetary Fund, China’s GDP was 71.4% of the US level in 2020, 4.2% higher than the previous year
- The share of world trade increased as pandemic-related exports increased sharply. According to official data, already the world’s largest exporter, shipments from China are up 3.6% in 2020. Total world trade has probably contracted by 5.6%, according to estimates by UNCTAD, the United Nations trade and development body
- China has likely regained its title as the world’s top foreign investment destination, which it lost to the US in 2015. Foreign investment in China reached more than $ 129.5 billion through November 2020, slightly more than the previous year. Worldwide, FDI flows are likely declined by 30-40% year-on-year in 2020 according to UNCTAD
- The Fortune Global 500 list of the world’s largest companies by revenue for the first time included more companies in China, including Hong Kong, than in the US: 124 vs. 121
- Sales receipts for the whole year passed through the US for the first time.
- National debt was added to the FTSE Russell benchmark index, completing the country’s inclusion in all three of the largest global bond indices. Foreign investors bought 1.1 trillion yuan ($ 170 billion) of Chinese bonds in 2020
China’s greater role in a post-pandemic world increases the urgency of the debate among the rest of the world on how to deal 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 Regional Comprehensive Economic Partnership November pact promising to reduce trade barriers in the region. In December, the European Union agreed on a comprehensive investment agreement with China.
“Countries will face a bipolar world rather than a unipolar world,” said Bo Zhuang, China chief economist at TS Lombard.
What Bloomberg Economics Says …
“Not only the growth of China, but also the growth pattern is important for the world economy. China continues to strive for movement to greater dependence on consumption for growth. For the rest of the world, China will increasingly become a consumer, in addition to the producer role it has long played. ”
– Chang Shu, chief economist in Asia
China’s leaders usually downplay economic milestones, such as the economic output that overtook Japan’s in 2010, for fear of scaring those already wary of its rise. Still, Beijing announced this year that it would strive for it double GDP from 2020 levels by 2035, a target implying a rise to number one.
Still, there is no guarantee that this will happen. China proved pessimists wrong in 2020 but faces huge challenges ranging from deteriorating relations with the US potentially limiting access to technology, over-reliance on debt-funded investment and a rapidly aging population.
Read more: Here’s how fast China’s economy is catching on Until The United States.
China’s role as a factory for the world was bolstered last year when it was pumped out face masks, medical equipment and home office equipment. While political leaders like France’s Emmanuel Macron have vowed to produce more at home after the pandemic – echoing US rhetoric about “Decoupling” from China – any shift to diversification of production will be gradual because of the high costs involved.
Stronger recovery
The Chinese economy picked up more this year, although others stagnated
Source: National Bureau of Statistics, Bloomberg surveys
Multinational corporations have yet another reason to stick with or even add to their investments in China: the fast-growing consumer market, which in some sectors is already overshadowing the US and Western Europe.
China now accounts for a quarter of the global middle class, defined as the population spending $ 11 to $ 110 per person per day in purchasing power parity terms in 2011, a milestone that “ would not have been reached until two years from now if Covid-19 had not been reached . It happened, ”said Kharas of the Brookings Institution.
Both General Motors Co and Volkswagen AG continued sold more cars in China last year than in their home markets. Starbucks Corp. plans to open about 600 new stores this year, Nike Inc. reports. sales in China of $ 2 billion for the first time in the quarter ended November.
“We’ve seen wave after wave of the pandemic hit different markets,” Matthew Friend, Nike’s chief financial officer, said during a call for investors in December. “And really, the only marketplace where we’ve seen any kind of progress in terms of managing the virus is China.”
– With help from James Mayger
(Updates with bullet point bond purchase details.)