The Chinese economy is expected to spark again this year … provided commodity prices do not soar.
China experienced a record growth rate (+ 18.3%) in the first quarter of this year. Is the Covid crisis now far behind for the country of Xi Jinping?
Cynthia Kalasopatan: This figure is indeed a record, it had never been so high since China published its statistics, but it must be qualified because it is largely explained by basic effects: the evolution of the gross domestic product is in fact calculated compared to the first quarter of last year, when the Chinese economy collapsed due to containment and the cessation of activity. If we look at quarterly variation, Chinese growth slowed slightly at the start of the year compared to the previous three months.
That said, it is true that China is one of the countries that is doing the best, and the fastest: it is one of the few to have recorded a positive growth rate in 2020 (+ 2%). , which allowed him to return to the pre-crisis level. And the increase in its GDP this year should exceed the authorities’ forecasts (+ 6%).
Why is China doing so well?
Last year, it benefited from a cyclical lag: it was the first to enter and exit containment, which allowed it to gain market share in world trade. Although domestic demand was subdued, demand from outside drove growth. This year, exports are expected to grow again and domestic consumption to finally recover, thanks to the improvement in the labor market and the relaxation of sanitary measures. In addition, China should benefit from the closure of borders in many countries: domestic tourism should be dynamic, which will boost the consumption of services.
Could elements still derail the machine?
Yes, we can expect a credit crunch this year, which carried some of the growth last year. It could have a negative effect. It will also be necessary to watch the increase in production costs in the manufacturing industry: the rise in raw materials could indeed penalize the country.