The ECB’s historic shift in inflation targeting
Authors: Chan Kung and He Jun
April 16, China’s National Bureau of Statistics has released economic data for the first quarter of 2021. Preliminary estimates show that China’s first-quarter GDP was RMB 24.931 billion, an increase of 18.3% year-on-year. annual and 0.6% quarter on quarter. at comparable prices. Q1 GDP was also 10.3% higher than Q1 2019 GDP, with a two-year average growth rate of 5.0%.
It should be noted that the 18.3% year-on-year GDP growth in the first quarter was unusual growth under the weak base effect. Although GDP growth in the first quarter was impressive, it was still slightly below market expectations of 20% growth. In particular, the economy grew 0.6% qoq in the first quarter, 2.6 percentage points lower than the qoq growth rate in the fourth quarter of 2020, indicating a slowing in the pace of the recovery. economic. Taking the first quarter of 2019 as a base, China’s GDP growth has averaged 5% over two years, which is still lower than the 5.8% growth rate in the fourth quarter of 2019 before the outbreak of the COVID-19 pandemic.
Chart: China’s quarterly economic growth rate in recent years
China’s quarter-on-quarter and year-on-year economic growth rate in recent years
China’s quarterly GDP growth rate
Data from the main sectors of the economy provides a more detailed picture of the performance of the economy in the first quarter.
In terms of industrial growth, in March, the the added value of industrial enterprises above the designated size increased by 14.1% year-on-year. In the first quarter, the added value of industrial enterprises above the designated size increased by 24.5% year on year, up 14.0% compared to the same period in 2019, and the two-year average growth rate was 6.8%, close to the growth rate of 6.9% at the end of 2019 before the outbreak of the pandemic. However, year-over-year growth slowed to 14.1% in March, below the market average forecast of 15.4%. In particular, industrial growth slowed to 0.6% QoQ seasonally adjusted, the first deceleration since December 2020. Some market analysts believe that industrial production in March did not continue the remarkably strong growth of January – February is one of the reasons that the year-on-year GDP growth in the first quarter did not hit the upper limit of 20% as expected by the market.
In terms of investment, from January to March, China’s fixed capital investment (excluding rural households) amounted to RMB9.59994 billion, up 25.6% year-on-year and 2.06% from October-December of the year last after adjusting for seasonal variations; it was 6.0% higher than from January to March in 2019, with an average growth rate of 2.9% in two years. Among them, private investment in fixed assets amounted to 5.5022 trillion RMB (representing 57.3% of total investment), up 26.0% year-on-year. On a monthly basis, investment in fixed assets (excluding rural households) increased by 1.51% in March. By industry, investment in primary industry was RMB 236.2 billion, up 45.9% year-on-year; investment in secondary industry was 2,792.9 trillion RMB, up 27.8%; investment in the tertiary sector reached 6.5703 billion RMB, up 24.1%. It can be seen that the growth of investment in the first quarter maintained a relatively strong momentum. In addition to significant year-over-year growth, investment also maintained significant quarter-over-quarter growth and maintained positive growth in March.
Consumption growth, which was negative last year, turned positive in the first quarter of this year. In March, total retail sales of consumer goods reached 3.5484 billion RMB, an increase of 34.2% year-on-year (well above market expectations of 28%); it was 12.9% higher than in March 2019, with an average growth rate of 6.3% in two years. After deducting price factors, total retail sales of consumer goods in March 2021 grew 33% in real terms, with an average growth of 4.4% in two years. On a monthly basis, total retail sales of consumer goods increased 1.75% in March. From January to March, total retail sales of consumer goods reached 10.5221 billion RMB, an increase of 33.9% year-on-year, with an average growth rate of 4.2% in two years; after seasonal adjustment, it increased 1.86% from October to December last year. In terms of online retail sales, from January to March, China’s online retail sales reached RMB 8093 billion, an annual growth of 29.9% and an average growth of 13.5% in two years. Of this total, online retail sales of physical goods reached RMB2.3067 billion, an increase of 25.8%, with an average growth of 15.4% in two years, accounting for 21.9% of the total. retail sales of consumer goods. If growth in retail consumption is sustained, it will provide significant support to China’s economic recovery this year.
In terms of income and expenditure, nationwide disposable income per capita reached 9,730 RMB in the first quarter, a nominal increase of 13.7% year-on-year, with a two-year average growth of 7. 0%, or a real increase of 13.7% over one year after deducting price factors, with average growth over two years of 4.5%. In the first quarter, the growth rate of disposable income per capita increased quarter after quarter, maintaining a stable growth of the recovery, but it was still significantly lower than the economic growth rate of the same period. In terms of urban and rural areas, the per capita disposable income of urban households was 13,120 RMB, a nominal increase of 12.27% year-on-year and an actual increase of 12.3%; per capita disposable income of rural households was 5,398 RMB, a nominal increase of 16.3% year-on-year and a real increase of 16.3% after deducting price factors. In the first quarter, China’s per capita consumption expenditure reached RMB 5,978, a nominal increase of 17.6% year-on-year or a real increase of 17.6% after deducting price factors; it was 8.0% higher than in the first quarter of 2019 with an average growth over two years of 3.9% or 1.4% after deducting price factors.
In terms of foreign trade, China’s merchandise imports and exports amounted to 8,470 billion RMB in the first quarter of this year, up 29.2 percent year-on-year, according to the General Administration of Customs. . Among them, exports increased 38.7% to reach 4.61 trillion RMB, imports increased 19.3% to reach 3.86 trillion RMB, and the trade surplus reached 759.29 billion RMB, an increase of 690.6%. In March, Chinese dollar-denominated exports rose 30.6% year-on-year, down 30 percentage points from January-February, while dollar-denominated imports rose 38.1%, in increase of 15.9 percentage points compared to January February. The trade surplus for the month was $ 13.8 billion, down $ 89.46 billion from January-February. In RMB terms, exports grew 20.7% in March from the previous year, down 29.4 percentage points from January-February, while imports increased by 27.7 %, up 13.2 percentage points from January-February. The trade surplus for the same month was 87.98 billion RMB, a decrease of 587.88 billion RMB. It can be seen that with the economic recovery at home and abroad, China’s imports and exports have grown significantly. The growth rate of imports exceeds that of exports, showing the characteristic of China as “the factory of the world”.
Overall, the Chinese economy grew strongly in the first quarter as expected due to a weak base effect. However, the growth rate was lower than the market expected. As ANBOUND has pointed out in the past, to fully understand the real picture of China’s post-pandemic economic growth, one needs to look at the economic growth of the past three years as a whole. Therefore, China’s quarterly economic growth this year will be high at the start of the year, and it will be lower thereafter. Economic growth over the next two years is expected to be significantly slower than this year.
It is also important to note that China may no longer be the star of the world’s major economies, as it was last year. As vaccines continue to roll out, the global economy will generally recover in 2021, with the US economy in particular rebounding strongly. Federal Reserve officials say the U.S. economy is expected to grow 6.5% this year, with the inflation rate hitting around 2.5% and the unemployment rate falling to around 5% by the end of the year. ‘year. Other institutions expect the United States to be the engine of global economic growth this year, contributing more to global economic growth than China; the US economy will be able to grow another 3.5% by 2022.
Conclusion of the final analysis:
As the global economy and the Chinese economy are both on the road to recovery, the most crucial goal for the Chinese economy is not to pursue a single year of growth, but to maintain stability for a long time. at least three years, while tackling its internal problems of the Chinese economy. In this regard, China’s macroeconomic policy should focus on the twin goals of “stability” and “risk prevention”, and the pursuit of balanced growth.