Workers make protective masks at a factory in Handan, Hebei Province, China on Jan. 22, 2020.
China Daily about REUTERS
BEIJING – Chinese leaders warned at a key economic planning meeting last week that growth was still facing many challenges.
While the rest of the world is still grappling with the shock of the coronavirus pandemic, China will be the only major economy expanding this year.
President Xi Jinping, Prime Minister Li Keqiang, and other heads of state and government who attended the Central Economic Work Conference from December 16-18, commented positively on China’s relative achievements and remained cautious of major changes in economic policy, according to state media. The annual meeting sets development priorities for the coming year.
The meeting indicated that while the country recognizes achievements, it needs to be clearly aware of the changes caused by the pandemic and uncertainties abroad, state media said.
“The foundation of our economic recovery is not yet solid,” the report said in a CNBC translation of the Chinese text.
Covid-19 first appeared in the Chinese city of Wuhan late last year. To control the outbreak, Chinese authorities temporarily closed more than half of the country earlier this year. GDP declined 6.8% in the first quarter before returning to growth at 3.2% in the second quarter.
“Not having a solid (foundation) yet indicates a slightly slower than expected start to domestic demand and consumption,” Bruce Pang, director of macro and strategy research at China Renaissance, said in a Chinese statement, according to a CNBC translation.
Investment in manufacturing and the non-government stake have not rebounded much, Pang said. He added there were doubts about the sustainability of exports, uncertainties about employment and many other concerns.
Economists have suggested that much of China’s recovery can be attributed to traditional growth drivers such as exports, fueled by overseas demand for pandemic-related products.
However, many Chinese have yet to increase their spending as they have concerns about future income. This lack of consumption affects an economy that Beijing seeks to support with domestic demand rather than foreign demand.
While China expects growth of around 2% this year, retail sales were down 4.8% year over year by the end of November.
“Next year the pace of economic growth could slow down from an initial rapid pace,” the state media said, according to a CNBC translation of the Chinese text. “Keeping the economy within reasonable limits remains an important test.”
GDP expansion in the first few months of next year would look high compared to the decline in the first quarter of 2020. Overall, many economists predict that China’s GDP will grow by around 8% next year.
Pang pointed out that the rate would represent a 5% growth in 2020 and a further 5% increase in 2021.
That’s slower than the 6.1% pace in 2019.
