The world’s largest exporter, China’s exports increased by 3.6% in 2020, according to official data.
Photographer: Qilai Shen / Bloomberg
Photographer: Qilai Shen / Bloomberg
China’s economic rise is accelerating just a year after its first coronavirus blockade, as its success in controlling Covid-19 allows it to increase its share of global trade and investment.
The world’s second-largest economy is expected to show a 2.1% increase in gross domestic product in 2020 on Monday, the only major economy to avoid a contraction, according to a Bloomberg survey of economists.
This should ensure that their participation in the world economy grows at the fastest rate in this century. Global production fell 4.2% last year, according to the World Bank, pushing China’s share to 14.5% at 2010 dollar prices – two years ahead of expectations.
At full throttle
China’s participation in the global economy is expected to grow at a faster pace
Source: IMF, World Bank, McKinsey & Company
And it is not just a problem that will be reversed when other major economies start to recover as vaccines are launched. Economists expect China’s GDP to grow 8.2% this year, continuing to outperform its global peers, including the US
China is now on track to overtake the United States as the largest economy in 2028, said Homi Kharas, Brookings Institution’s deputy director of global economy and development program, two years faster than he had previously estimated.
After facing President Donald Trump trade war, China is deepening economic ties within Asia and Europe and looking to domestic consumption to boost its next growth phase. President Xi Jinping said this week that “the time and the situation” were on the country’s side in a new year marked by domestic turmoil in the US
Read more: Optimistic Xi says time is on China’s side while turbulence grips the US
If the success of local virus control continues, the pandemic could help China “solidify its position in the global economy,” said Ka Zeng, director of Asian studies at the University of Arkansas. American and European companies are likely to focus more on China due to “the country’s potential being 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 on record. China’s GDP was 71.4% of U.S. levels in 2020, according to the International Monetary Fund, up 4.2% from the previous year
- The share of global trade increased with the increase in exports related to the pandemic. The world’s largest exporter, shipments from China increased by 3.6% in 2020, according to official data. Total world trade probably contracted 5.6%, according to estimates by the United Nations Trade and Development Agency, UNCTAD
- China probably regained its title as the world’s top destination for foreign investment, losing to the U.S. in 2015. Foreign investment in China reached more than $ 129.5 billion by November 2020, slightly above the previous year. Globally, FDI flows are likely to have fell 30-40% year on year in 2020, according to UNCTAD
- Fortune Global 500 list of the world’s largest companies in revenue for the first time contained more companies based in China, including Hong Kong, than in the USA: 124 vs. 121
- Full-year box office revenue overtook the USA for the first time
- Sovereign debt was added to the FTSE Russell benchmark, completing the country’s inclusion in the top three global bond indices. Foreign investors bought 1.1 trillion yuan ($ 170 billion) in Chinese bonds in 2020
China’s enhanced role in a post-pandemic world increases the urgency of the debate among the rest of the world about how to get involved with Beijing. While the Trump administration imposed tariffs and restricted access to key technologies, other countries sought closer commercial and investment ties.
Fifteen Asian countries, including China, have signed the Comprehensive Regional Economic Partnership November, promising to reduce trade barriers in the region. In December, the European Union agreed to a broad investment agreement with China.
“Countries will have to deal with a bipolar world, instead of a unipolar world,” said Bo Zhuang, chief economist for China at TS Lombard.
What the Bloomberg economy says …
“Not only China’s growth, but also the pattern of its growth is important for the global economy. China continues to strive to change for greater dependence on consumption for growth. For the rest of the world, China will increasingly become a consumer, in addition to the role of producer it has played for a long time. “
– Chang Shu, chief economist in Asia
China’s leaders generally downplay economic milestones, as their economic output surpassed Japan’s in 2010, for fear of scaring those who are already concerned about its rise. However, Beijing announced this year that it would aim to to double GDP from 2020 levels to 2035, a target that implies a march towards number one.
Still, there is no guarantee that this will happen. China has proved that pessimists were wrong in 2020, but faces huge challenges ranging from the worsening of relations with the United States, potentially limiting its access to technology, an excessive reliance on debt-financed investments and a rapidly aging population.
Read More: See how China’s economy is growing rapidly Up until the USA
China’s role as a factory for the world was reinforced last year as it pumped face masks, medical equipment and equipment for working at home. While political leaders like Frenchman Emmanuel Macron promised to manufacture more at home after the pandemic – echoing US rhetoric about “Decoupling” from China – any change to diversify production will be gradual due to the high costs involved.
Stronger recovery
China’s economy is recovering more this year, even as others stagnate
Source: National Bureau of Statistics, Bloomberg surveys
Multinational companies have another reason to persist or even increase their investments in China: the rapidly growing consumer market, which is already eclipsing the United States and Western Europe in some sectors.
China now accounts for a quarter of the global middle class, defined as the population that spends $ 11 to $ 110 per person per day in terms of 2011 purchasing power parity, a milestone that “would not have been reached by more two years if Covid-19 hadn’t happened, ”said Kharas of the Brookings Institution.
Both General Motors Co and Volkswagen AG continued to they sell more cars in China than in their domestic markets last year. Starbucks Corp. plans to open about 600 new stores this year, while Nike Inc. reported sales in China of $ 2 billion for the first time in the quarter ended in November.
“We saw wave after wave of the pandemic reaching different markets,” said Matthew Friend, Nike’s chief financial officer, in an investor conference call in December. “And really, the only market where we saw a kind of continuous trajectory in terms of managing the virus was China.”
– With the help of James Mayger
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