BlackRock Investment Institute

Macro insights

China: focusing on quality - not quantity - of growth

China has led the post-Covid activity restart globally – cementing its position as one of the two main engines of global activity – underpinning our Globalization Rewired theme. China will likely emerge as the one large economy globally with positive calendar year growth in 2020. The swift activity rebound has helped Q4 2020 GDP to return to pre-Covid trends, as shown on the chart.

China's recovery
Estimated and actual real GDP growth in China, 2019-2022

Chart showing China's growth has rebounded to trend within a year

Source: BlackRock Investment Institute, with data from Refinitiv Datastream, IMF and China’s National Bureau of Statistics, February 2021. The orange line  shows the actual GDP up to Q4 2020 (from the NBS)  and estimated real GDP (dotted line) for China. Consensus estimates are based on the latest Reuters poll of economists. The yellow line shows the implied path of China’s real GDP projected by the IMF in its World Economic Outlook in Oct 2019.

We view the softer-than-expected activity data in January as a mild speed bump. Tighter virus restrictions, colder weather and a gradual normalizing of policy as authorities turn their focus back to longer-term reforms have played a part. Yet a narrow focus on Chinese GDP growth rates misses a more important shift to quality of growth from the quantity of growth, in our view.

The forthcoming National People’s Congress – that begins on March 5 – will likely focus on longer term issues such as the control of financial risks, paving the way for strengthened creditor protections and streamlined bankruptcy measures

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