BlackRock Investment Institute

Macro insights

China leads the restart

China is still leading the restart in global activity. Better management of Covid outbreaks means that activity should return to the pre-Covid trend far ahead of both developed and emerging market peers. Strength in exports and domestic consumption means China’s growth is likely to be above the global average this year and next. And stronger growth in China - the only major economy expected to grow positively on average in 2020 - is important in the context of an increasingly bipolar world, with the U.S. and China set to be the dual engines of growth.

Real Chinese growth and growth forecasts, 2019-2022

Sources: BlackRock Investment Institute and the IMF, with data from Haver Analytics, Nov. 2020. Note: The solid orange line shows the path of real GDP in China, indexed to 100 in Q1 2019. The dotted orange line shows the implied level of GDP based on Bloomberg consensus forecasts of year-on-year growth rates at a quarterly frequency. The yellow dotted line shows the path of real GDP under the IMF’s October 2019 World Economic Outlook forecast. There is no guarantee any forecasts made will come to pass.

Consensus expectation is for the level of activity in China to return to the pre-Covid trend by the end of 2020. See the chart above. This contrasts sharply with the U.S. and euro area, where the consensus sees activity returning to pre-Covid levels by the end of next year – although the positive news around vaccines could change this. China’s comprehensive fiscal and monetary policy support has now started to moderate, and this means the risk of financial vulnerabilities caused by Covid should be contained.

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