- Q1 GDP Growth Jumps 1.1% on Strong Personal Consumption
- A Strong March Leads to a Surge in Chinese GDP in Q1 2023
- Durable Goods Retail Sales Suffer from High Interest Rates and Wary Consumers
- Choppy GDP Means UK Should Avoid Q1 Recession
- Japanese Consumer Confidence Jumps to Highest Level in Over a Year
- The End of Summer Sees the End of Disinflation in Europe
- Labor Market Indicators are Starting to Unify on Easing in Hiring
- Inflation and Tight Financial Conditions Weigh on the German Consumer
- Euro Area Money Supply Contracts for the First Time Since 2010
- Dismal Economic Data Out of Germany
- Core Durable Goods New Orders See Gentle Uptrend in July
- More UK Data Pointing to Q3 Decline
- Whispers of a UK Contraction in Q3
- Japan's Core Inflation Resumes Uptrend in July
- Early July Economic Data Leads to a Sharp Increase in Q3 Growth Expectations
- UK CPI: Energy Inflation Crashes but Services Inflation is Still Sticky
- China's Weak Start to Q3 Means More PBoC Easing
- A Breather for the Eurozone as Inflation Hits Two-Year Low
- Germany's September CPI Report: A Clearer Picture of Inflation Trends
- US Manufacturing Demonstrates Resilience Amidst Volatility in August
- The ECB Prepares to Address Excess Liquidity Through the MRR
- Bank of Japan is Too Optimistic on Inflation
- The Bank of England Pauses in a Near Split Decision
- UK Inflation August Update: A Precursor to the Bank of England's Announcement
- Housing Starts Tumble in August Amid Rising Mortgage Rates
- US Retail Sales Grow at Fastest Monthly Rate Since the Start of the Year
- US Consumer Prices Surge in August Driven by Energy Costs
- August NFIB Survey Showed a Tough Environment for Small Businesses
- All Signs Point to a Weaker Labor Market in August
- Chinese CPI Trying to Buck the Deflation Trend
- Energy Prices Rise but the Core Disinflationary Trend is Maintained in September
- PPI's Quiet Rise and the Energy Elephant in the Room
- Small Businesses Grapple with Inflation and Financial Strain in September
- A Wacky September Jobs Report Shows Strong Labor Market
- A Look at the Fragile US Labor Market Ahead of the Nonfarm Payrolls Report
- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
- Political Polarization Intensifies with Another Impeachment Along Party Lines
- Metal Demand Has a Bright Future in 2021 and Beyond
- What Happened to That US-China Trade Dispute?
- Civil Unrest, A Rising Threat to the 2021 Economy
- What's in the $900 Billion Relief Plan?
China GDP Growth Surpasses Expectations
January 19, 2021
The highlight of the week so far has been the recent GDP news out of China. The Asian giant released its figures for the end of the year and stunned the world. According to the Chinese government, its country saw GDP growth of 6.5% in Q4 completing the year strong and achieving annual growth of 2.3% for the year. The positive growth outpaces most if not all major economies including the United States and the Eurozone economies which are likely headed for negative year-on-year growth in 2020.
The marquee World Economic Outlook noted the development of a quick recovery in economic growth in China that was "faster than expected" in its October Update of the report. China seemed to be an exception to the greater economic downtrend (as visualized by the chart of industrial production) and the report made sure to point that out. However, it also suggested there were obstacles to achieving pre-pandemic GDP levels. In the end, the international financial organization just missed its China 2020 GDP growth projection of 1.9% by 0.4% (it's worth noting the IMF's April projection was 1.2% and June projection was 1.0%).
The Chinese outperformance wasn't due to the amount of financial support its central bank and its government provided to the economy. Deficit spending was only allowed to rise from 2.8% of GDP to 3.6% of GDP. While it did set a record high for the nation, it was nothing close to the US 2020 budget deficit of 14.9% of GDP, up from 4.6% of GDP, estimated by the CBO. This included a fiscal stimulus bill put forth by Beijing in May 2020 worth about $500 billion, a much smaller price tag than the $3 trillion that the US put forth. Spending in the European Union has outpaced China as well with an estimate of 16% of EU GDP in spending on liquidity support including a recent relief package worth about $655 billion.
Instead, China's outperformance appears to have been due to its success in suppressing the spread of COVID-19 with strict lockdown procedures which included lockdowns of entire apartment buildings and even cities when an outbreak started. China could also rely on its citizen's mindfulness of public health which includes familiarity with face masks. According to official data, China has seen only 71 cases per 1 million people, compared to the world average of 12,583 cases per 1 million people, and only 34 deaths per 1 million people, compared to the world average of 2,686 deaths per 1 million people. These numbers are better than most African nations and island nations (which are arguably easier to lockdown and quarantine) like New Zealand, Australia, and Cuba.
Evidence of a strong recovery and a successful repellant of COVID-19 can be found in trade data. In particular, there is evidence of strength in steel production data since China supplies over 50% of global steel. According to a FAS report, Chinese steel production increased 4.5% in the first 3 quarters of 2020 over the first 3 quarters of 2019. In the same period, steel production fell double-digits in the EU, North America, India, and Japan. China also imported 7.3% more crude oil in 2020 at a rate of 10.85 million barrels a day and set a record in LNG imports in December 2020 at over 9 million tons.
There is a sizeable amount of skepticism in China's numbers, both economic and COVID-19 cases, that has stemmed from confusion in China's cooperation with the World Health Organization and the general opacity in which its data is released. However, there is also evidence to support the positive numbers as well. In fact, skeptics are likely biased by their own understanding of the virus the pandemic which has brought a whirlwind of disease and death to most developed nations in the world. There is no doubt that the Chinese economy has proven to be resilient in the past with an economy that has continued to beat expectations. And as a citizen of the global economy, that should be seen as a sign of hope that the world can bounce back too not just because of the interconnectedness of economies but because it can provide a blueprint back for the rest of the world to follow.