China economy grows in 2020 as rebound from virus gains

China reports its economy grew 2.3% in 2020 as a recovery from the coronavirus pandemic accelerated while the United States, Europe and Japan struggled with disease outbreaks

BEIJING — China eked out 2.3% economic growth in 2020, likely becoming the only major economy to expand as shops and factories reopened relatively early from a shutdown to fight the coronavirus while the United States, Japan and Europe struggled with disease flare-ups.

Growth in the three months ending in December rose to 6.5% over a year earlier, up from the previous quarter’s 4.9% and stronger than many forecasters expected, official data showed Monday.

In early 2020, activity contracted by 6.8% in the first quarter as the ruling Communist Party took the then-unprecedented step of shutting down most of its economy to fight the virus. The following quarter, China became the first major country to grow again with a 3.2% expansion after the party declared victory over the virus in March and allowed factories, shops and offices to reopen.

Exports were boosted by demand for Chinese-made masks and other medical goods.

The growing momentum “reflected improving private consumption expenditure as well as buoyant net exports,” said Rajiv Biswas of IHS Markit in a report. He said China is likely to be the only major economy to grow in 2020 while developed countries and most major emerging markets were in recession.

The economy “recovered steadily” and “living standards were ensured forcefully,” the National Bureau of Statistics said in a statement. It said the ruling party’s development goals were “accomplished better than expectation” but gave no details.

2020 was China’s weakest growth in decades and below 1990’s 3.9% following the crackdown on the Tiananmen Square pro-democracy movement, which led to China’s international isolation.

Despite growth for the year, “it is too early to conclude that this is a full recovery,” Iris Pang of ING said in a report. “External demand has not yet fully recovered. This is a big hurdle.”

Exporters and high-tech manufacturers face uncertainty about how President-elect Joseph Biden will handle conflicts with Beijing over trade, technology and security. His predecessor, Donald Trump, hurt exporters by hiking tariffs on Chinese goods and manufacturers including telecom equipment giant Huawei and imposing curbs on access to U.S. components and technology.

“We expect the newly elected U.S. government will continue most of the current policies on China, at least for the first quarter,” Pang said.

The International Monetary Fund and private sector forecasters expect economic growth to rise further this year to above 8%.

Exports rose 3.6% last year despite the tariff war with Washington. Exporters took market share from foreign competitors that still faced anti-virus restrictions.

Retail spending contracted by 3.9% over 2019 but gained 4.6% in December over a year earlier as demand revived. Consumer spending recovered to above the previous year’s levels in the quarter ending in September.

Online sales of consumer goods rose 14.8% as millions of families who were ordered to stay home shifted to buying groceries and clothing online.

Factory output rose 2.8% over 2019. Activity accelerated toward the end of the year. Production rose 7.3 in December.

China has re-imposed travel controls in some areas after a spate of cases this month but most of the country is unaffected.

Authorities have called on the public to avoid travel and large gatherings during next month’s Lunar New Year holiday, when millions of people usually visit their hometowns. That might dent spending on travel, gifts and restaurants.

Other activity might increase, however, if farms, factories and traders keep operating instead of closing for up to two weeks for the holiday, Chaoping Zhu of JP Morgan Asset Management said in a report.

“Unusually high growth rates in this quarter are likely to be seen,” said Zhu.

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National Bureau of Statistics (in Chinese): www.stats.gov.cn