China has become the only major economy in the world the end up with positive GDP growth in 2020. Data released by China’s National Bureau of Statistics put GDP growth in the December quarter at 6.5%. This has catapulted the annual growth figure for 2020 to 2.3%, despite a 6.8% contraction in the quarter ending March 2020, which was when China was dealing with a spike in Covid-19 cases.
The 2.3% GDP growth in 2020 is 30 basis points – one basis point is one hundredth of a percentage point – more than the 2% projection made by the World Bank’s Global Economic Prospects released earlier this month. All major economies, country groups and sub-regions (East Asia and Pacific being the only exception, thanks to China) are expected to experience a contraction in their GDP in 2020.
Chinese economy is expected to outperform most major economies even in 2021. This is despite the fact that the others will have a more favourable base effect due to economic contraction this year. The difference in growth performance in 2020 and 2021 is likely to close the gap between the US and Chinese economies significantly. In 2019, China’s GDP was $14.3 trillion in current prices, around two-thirds of the US GDP of $21.4 trillion. With China’s GDP growth exceeding that of the US by 5.9 and 4.4 percentage points in 2020 and 2021 respectively, the US-China GDP gap is expected to come down significantly.
To be sure, the Chinese economy has its share of challenges. Chinese economy’s exceptional performance has “been fuelled by a surprisingly resilient export sector” even as “consumption – a key driver of growth – has lagged expectations”, Reuters reported.