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21 Jan 2021

Econ Digest

China's economic recovery plan in 2021 will focus on green and new infrastructure investment

The economy of China in the fourth quarter of 2020 grew by 6.5%YoY, amounting to full-year growth that exceeded projections, at 2.3% YoY. The figures reflect China's success in efficiently controlling the COVID-19 pandemic and implementing both monetary and fiscal stimuli in a timely and effective manner. KResearch projects that China's economy in 2021 will resume its growth in the range of 8.0-8.5%YoY, supported by the recently revived and continuous consumption in the country's private sector. The improvement is attributable to the rising purchasing power of the Chinese middle-class, which currently numbers around 400 million people, and increasing per capita income (PCI) as a result of higher skills and efficiency in the workforce along with other measures issued by the government to stimulate consumption.

 

Economic growth in 2021 will be markedly different, with a shift in emphasis from short-term impetus to mitigate the COVID-19 crisis to that of long-term qualitative growth which involves investment in the population's quality of life, investment in the development of new basic infrastructure and application of new technologies for long-term, sustainable development as a way of strengthening a circular economy alongside the promotion of external sectors. Amid a slowdown in Chinese businesses' investment in traditional industries and uncertainty surrounding the export market, investments within industries related to new technologies by the public and private sectors will serve as the main driver of China's economy in line with China's “Dual Circulation" model as outlined in China's 14th Five-Year Plan for National Economic and Social Development, which will be in place from 2021 to 2025.

 

Although the Chinese economy in 2021 shows a good growth trend, there are issues that need to be monitored, including the balancing between short-term stimuli and long-term systemic risk from a high level of private debt after injection of large amounts of money to increase liquidity in the economic system, the uncertainty of the global economy, as well as the geopolitical risk that may stem from competition between the US and China.


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Econ Digest