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China’s economic recovery is going strong, despite a slight hiccup
- The Chinese economy was hit by renewed coronavirus outbreaks before the Lunar New Year, but the effects were uneven and rather short-lived
- There are plenty of reasons to be optimistic about China’s economic outlook. Mobility is returning to levels seen in 2019, and China has started a vaccine drive
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Aidan Yao is a senior investment strategist for Asia at Amundi, based in Hong Kong.
China’s economy started 2021 on an uneven footing. In the first two months, the supply-side recovery continued, with industrial and manufacturing production gaining further steam thanks to strong external demand and less Lunar New Year holiday disruption because of this year’s “stay put” policy.
In contrast, retail sales and investment, outside real estate, were hit by an unusually cold winter and tighter mobility restrictions following a resurgence in Covid-19 cases before the Lunar New Year. The recovery in domestic demand was therefore halted, although the effects appear to have been rather short-lived.
A combination of a subsiding pandemic, accelerated vaccination, a faster recovery of global demand and a slower exit of fiscal stimulus suggests growth in 2021 may be better than we forecast.
Apart from the usual seasonal patterns, interpretation of this year’s economic data has been made more difficult by the economic fallout from Covid-19. Although major activity indicators skyrocketed year on year in January and February, it was really a reflection of the devastating shock from the pandemic last year.
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