The Daily Update: China GDP Growth

China, which first reported the emergence of the Covid-19 virus back in late 2019, yesterday reported that the country’s GDP grew by 2.3% in 2020, the only major economy to show positive GDP numbers for last year (although it was the slowest growth for 44 years). In the last quarter of 2020, gross domestic product rose by massive 6.5% from a year ago, official data from the National Bureau of Statistics confirmed. Both numbers beat analysts’ expectations. Economists had expected a growth of just over 2% for 2020, with just over 6% for the fourth quarter. However, it was not all good news, with retail sales shrinking nearly 4% for the year.

The figures back up a report by The Centre for Economics and Business Research (CEBR) released at the end of last year that state that China will overtake the US as the world’s biggest economy before the end of the decade. This is mainly due to China outperforming its larger rival during the ongoing global pandemic. The report states that by 2028 China’s economy (when measured in USD) will overtake that of the US, half a decade sooner than it was expected to 12 months earlier.

The CEBR’s deputy chairman Douglas McWilliams said ‘The big news in this forecast is the speed of growth of the Chinese economy. We expect it to become an upper-income economy during the current five-year plan period (2020-25). And we expect it to overtake the US a full five years earlier than we did a year ago’. However, China is not alone in moving rapidly in the league table with other Asian countries also improving dramatically. As McWilliams states ‘Other Asian economies are also shooting up the league table. One lesson for western policymakers, who have performed relatively badly during the pandemic, is that they need to pay much more attention to what is happening in Asia rather than simply looking at each other’.

Since the turn of the century China’s share of global GDP has increased from 3.6% to 17.8% in 2019. It will become a high-income country by 2023 when it passes the $12,526 per capita threshold. Of course, this number is still well behind western economies (the UK average per capita income is just over $39,000, with the US at $63,000) however, China is definitely headed in the right direction.