China soars to record growth but Covid recovery shows signs of slowing

William Langley
·3 min read

A year after the Covid-19 pandemic shuttered shops and closed factories, China’s economy has burst back to life.

The country’s gross domestic product soared 18.3 percent in the first quarter of this year when compared to the same period in 2020, according to official figures announced Friday.

That’s the biggest year-on-year leap since Beijing’s National Bureau of Statistics began releasing GDP figures in 1992.

The surge fell just short of expectations, however, with one Reuters poll anticipating growth of 19 percent.

It also illustrates the extent of the pandemic slowdown from which the world's second-largest economy is still recovering.

In the first quarter of last year, its economy shrank by 6.8 percent as the country endured one of the strictest Covid lockdowns in the world to fight the rampant virus.

Compared to the final quarter of last year, China’s economy grew by just 0.6 percent in the first three months of 2021, suggesting its economic recovery may actually be slowing down.

China eked out 2.3 percent growth last year, becoming the only major economy to expand while the United States, Europe and Japan struggled with renewed virus outbreaks and lockdowns.

But there are fears the country’s property market is overheated and that trade may continue to be hit by tensions with Washington, which have continued since President Joe Biden took office.

Image: A worker walks along scaffolding at a construction site in Beijing (Noel Celis / AFP - Getty Images)
Image: A worker walks along scaffolding at a construction site in Beijing (Noel Celis / AFP - Getty Images)

NBS spokeswoman Liu Aihua said the country had demonstrated a steady economic recovery in the first quarter but added that there remained “a strong degree of uncertainty” as the pandemic continues to rage across the globe.

“The basis of the national economic recovery is not secure, long-term structural contradictions are still as present as before and there are even a few new problems and circumstances in development,” she said.

Manufacturing, auto sales and consumer spending have recovered to above pre-pandemic levels since the ruling Communist Party declared victory over the virus last March and allowed factories and stores to reopen.

Restaurants and shopping malls are filling up, though visitors are still checked for Covid’s telltale fever.

The figures released on Friday showed the retail sector grew by 34.2 percent, in a clear sign that Chinese consumers were heading back to stores that were closed during the pandemic.

“Business is definitely good," said Zhang Ji, 27, who owns a clothing store in Beijing. "And what’s more, business is good for all my colleagues in the industry too.”

Zhang said that while his offline sales had slowed during the pandemic, sales in person and online had increased every month since June last year.

He said business had been particularly strong since January. “The future is definitely bright,” he added.

Image: An employee working on an assembly line at an auto plant of Dongfeng Honda in Wuhan in China's central Hubei province (AFP - Getty Images)
Image: An employee working on an assembly line at an auto plant of Dongfeng Honda in Wuhan in China's central Hubei province (AFP - Getty Images)

Andrew Collier, managing director of Oriental Capital Research, said that the country’s ability to emerge quickly from lockdown was crucial to its growth.

“China was able to shut down many parts of the country very quickly. As a result of that they could get the consumers back spending money more quickly than they were able to do in Europe and the U.S. for example,” said Collier.

Collier cautioned that while the growth figures were high, the “quality” of the growth was less so.

Much of China’s economic recovery had relied on heavy state investment in industries like steel and concrete, he said, which risked imperiling the country’s efforts to “rebalance” its economy toward domestic consumption and services.

“For every yuan they spend they get less and less impact,” said Collier. “It’s a very lopsided, heavily industrialized country that’s growing slower and slower.”