The Chinese economy grew by 2.3 percent in 2020, according to the latest figure released by the National Bureau of Statistics. The potential growth rate of the Chinese economy, or the long-term average growth rate, is around 6 percent. This means last year's economic performance was slightly below the regular economic growth rate which the country would have achieved if COVID-19 had not hit.
China is the only economy that registered growth in a pandemic-ravaged world. The UK posted an economic growth rate of -9.9 percent in 2020, far below the potential growth rate. The figure touched -3.5 percent in the U.S. where the potential growth rate is around 2-3 percent. A growth rate of 2.3 percent has been truly remarkable in China, which has fought well against the pandemic.
Looking into the details, the Chinese economy shrunk by 6.8 percent in the first quarter of 2020. However, with the swift containing of the virus, the GDP growth rate bounced back to the positive territory and increased in the second, third and fourth quarters, hitting 3.2 percent, 4.9 percent and 6.5 percent, respectively.
The GDP growth rate for the Chinese economy in the fourth quarter of 2020 is particularly important. The 6.5-percent growth rate in this quarter is very close to the previous economic growth rates that the Chinese economy attained in the past few years. In 2018 and 2019, the Chinese economy expanded at the rates of 6.7 percent and 6.0 percent, respectively. As the pandemic has been very well-contained in China during the winter, it is possible that the economic growth rate of China in 2021 will remain between 6 and 7 percent.
Furthermore, the economic growth rate for the first quarter of 2021 could be very high, bringing a surprise for the market. This is because of an economic phenomenon called the tail-rising effect. A tail-rising effect means that when the economic performance has been particularly weak in a certain period of a year, such as the first quarter of 2020, the economic growth rate in the same period for the next year will be extraordinarily high, since the base for comparison is set low. Therefore, as the Chinese economy is now on the right track and the economic growth rate turned back to normal in the fourth quarter of 2020, it is very possible that the first quarter of 2021 will show us a very high economic growth rate.
Amid China's actions to boost its economy, the fight against the pandemic has been the most important one. Besides, the building of economic infrastructure has also been important. In 2020, China built 2,521 kilometres of new high-speed railroads and upgraded 12,713 kilometres of existing high-speed railroads. This completed the mainframe of its high-speed railroad network. In 2020, China also started the use of its 5G network and the total mobile network data flow reached 166 billion gigabytes, 36 percent more than a year ago.
As the Chinese economy has performed stably in 2020, China's foreign exchange reserves also increased by $109 billion and are now at $3,216 billion. China has the largest foreign exchange reserves in the world, providing a solid support to China's international trade. In 2020, the China's international trade increased stably. Totally 4.5 billion tonnes of goods, under the category of international trade, passed through the Chinese ports, posting an increase of 4 percent from 2019.
Rapid economic growth was also witnessed in many other industries. At the end of 2020, Chinese people owned 280 million automobiles, 19.4 million more than a year ago. The total business of the postal industry reached 2.1 trillion yuan ($320 billion), 29.7 percent more than a year ago.
In the financial year of 2020, some areas, such as domestic consumption as well as travelling, tourism and filming industries, experienced a downward pressure caused by the measures taken to contain the pandemic. However, in 2021, as the pandemic is now gradually slowing down with the help of vaccinations, these industries will revive and bring new support to the Chinese economy. It is very possible to see a remarkable economic performance by China in 2021.
