China Quarterly Overview – Q4 2021

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Despite the challenges faced domestically and an unpredictable international environment, China’s GDP still saw the highest growth rate it has experienced in a decade. Partially due to the low base figure that was set in 2020, China’s stringent COVID-19 measures gave the economy a major boost early on, with growth tapering down to conclude the year.

The annual performance of the Chinese economy, which has exceeded expectations and outperforms other major counterparts, illustrates China’s sustained development and path to economic recovery.

China’s GDP Growth in 2021

Annual Summary of GDP

China’s GDP saw an increase of 8.1%, from 2020, marking the highest annual growth rate China has seen over the past decade. According to the National Bureau of Statistics, China’s GDP had increased to approximately USD $18 trillion in 2021. This high growth rate, which is partially as a result of the stunted performance in 2020, achieved well above the expected annual target of 6% as set by the Chinese government.

China’s GDP in Q4

Graph 1. Quarterly GDP 2020-2021

In Q4 of 2021 we saw China’s growth taper down from the previous three quarters, with the GDP growing at only 4%. This is significantly less than the 18.3% from Q1, 7.9% from Q2 and 4.9% seen in Q3.

Imports and Exports Experienced Accelerated Growth

China posted a record trade surplus in 2021, where the total value of imports and exports of goods had seen an increase of 21.4% from the previous year, reaching a total value of USD $676,4 billion. The value of imports was up by 21.5%, while the value of exports saw an increase of 21.2%. The impressive performance continued in December, as exports remained robust, even amidst a slowdown in import growth.

Employment Remained Stable with a Decline in Urban Unemployment

Graph 2. Unemployment rate 2021

The number of newly employed people in urban areas saw an increase of 830,000 from the previous year, with a total of 12.69 million. In December of 2021, the surveyed unemployment rate of urban areas was 5.1%, which is 0.1% lower than the same period of 2020. The unemployment rate of the surveyed population aged between 16 – 24 years old was 14.3%, while the unemployment rate of the population aged between 25 – 59 was 4.4%.

Purchasing Managers Index (PMI) Remained Strong

Graph 3. PMI 2020-2021

The composite PMI output index for large enterprises is a weighted summation of the manufacturing output index and non-manufacturing business activity index. If the PMI index is 50 this indicates no change, whereas a number over 50 indicates improvement and a number below 50 suggests a decline.

The Composite PMI, which is indicative of the direction of economic trends in the manufacturing and service sectors, was 52.2 in December. The same figure remains unchanged from the previous month, indicating the stable expansion in the production and operating activities of enterprises in China.

Despite a decline close to the benchmark figure at the beginning of the quarter, with the PMI decreasing to 50.8, the final two months of the year allowed for 2021 to be concluded stably for Chinese enterprises.

­­Increase in Total Retail Sales of Consumer Goods

In 2021, the total retail sales of consumer goods experienced a 12.5% increase from the previous year, with an average two-year growth of 3.9%.

National online retail sales grew by 14.1% over the previous year. The retail sales of physical goods experienced an increase of 12%, which accounted for 24.5% of the total retail sales of consumer goods. The online retail sales of clothing, consumer goods, food and physical goods had all experienced an increase.

While retail sales in consumer goods did increase, total retail sales in December grew by only 1.7%, which did not meet the expected increase of more than 3%.

Industrial Production Saw Sustained Growth While Manufacturing Experienced Rapid Growth

Graph 4. Industrial Production 2020-2021

The overall value of industrial enterprises had seen an increase of 9.6% from the previous year, with an average two-year growth of 6.1%. Manufacturing experienced an increase of 9.8%, with high tech manufacturing seeing an 18.2% increase and equipment manufacturing by 12.9%.

The total profit generated by industrial enterprises over the first eleven months of 2021 was up by 38% year on year, with an average two-year growth of 18.9%.

Final Thoughts

Coming into 2022 policymakers are pledging to increase fiscal support for the economy, accelerate infrastructure investment and implement more tax cuts. Moving into the new year, consumption is likely to be affected, due to increased restrictions on business activity and travel restrictions being imposed. Despite the implications of the restrictions, China’s economy is still expected to grow more than 4% in 2022.

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