China’s Q1 GDP up 18.3%, FDI up 39.9% year-on-year
April 20, 2021 Category Macro-economy, Weekly
China’s GDP grew by 18.3% year-on-year in the first quarter of 2021 to CNY24.9 trillion, the fastest in three decades, with key economic indicators all expanding at over 20%, setting an encouraging start for the year. The data provide an indication of the strength of China’s economic recovery, which has been retaking lost ground since the second half of 2020. The country is likely to record the highest growth among major economies and make the greatest contribution to the global economy in the first quarter, analysts noted. Looking ahead, China’s economy is forecast to keep a stable growth, but may enter “unchartered waters” in the second half of the year as geopolitical tensions keep developing and the marginal effect of global economic recovery has weakened.
Some analysts are upbeat about China’s GDP which might increase by double-digits in the second quarter. For the whole year, the growth rate could reach 9%, analysts said, well above the government-set goal of “above 6%”.
In the first three months of 2020, the Chinese economy contracted by 6.8% due to the coronavirus lockdown. In the first quarter of this year, retail sales soared 33.9%, fixed-asset investment (FAI) jumped 25.6%, and industrial production gained over 24.5%, data released by the National Bureau of Statistics (NBS) showed. In March alone, retail sales jumped 34.2% year-on-year, with the growth rate quickening 0.4 percentage points from the first two months. Industry observers said the data underscores a broadened recovery momentum, particularly in March, which marks a watershed in consumption from “divergent recovery” to “going full swing.” “The pace of the economic recovery in the second and following quarters would rely more on the recovery of the service sector,” Fidelity International said in a note. Building on the momentum, China will continue to make the biggest contribution to the global economy, serving as an engine of growth for the world. Its gap with the U.S. is expected to further narrow. In 2020, China’s economic volume represented about 70% that of the U.S., the Global Times reports.
After surpassing the U.S. as the world’s biggest recipient of foreign direct investment (FDI) in 2020, China continues to see rapid growth in foreign investment this year, as confidence in the country’ growth prospects and opening-up further improves. The Ministry of Commerce (MOFCOM) reported that the first quarter of 2021 saw the country’s actual use of foreign investment hitting CNY302.47 billion, up 39.9% year-on-year. “Compared with the same period in 2019, the country’s actual use of foreign investment during the first quarter saw an increase of 24.8%,” Ministry Spokesman Gao Feng said. In U.S. dollar terms, China’s actual use of foreign capital in the first quarter reached USD44.86 billion, up 43.8% year-on-year. Moreover, 10,263 foreign-invested enterprises (FIEs) were established during the period, up 47.8% year-on-year. The figure was 6.7% higher than in the same period in 2019. Zhang Fei, Associate Director of the Institute of Foreign Investment of the Chinese Academy of International Trade and Economic Cooperation, said the data demonstrates the upward momentum of China’s use of foreign capital, considering the number of newly established foreign-invested enterprises and the amount of foreign investment have both swelled significantly no matter how they are compared with the same period last year or in 2019.
“Foreign companies have generally enjoyed high-level profit growth in the China market, which boosted their confidence to keep investing in China, thanks to continuously enhanced negative lists, the ever-improving business environment, and the efforts by local governments at different levels to serve foreign investment projects,” Zhang said. Inflows of foreign capital into high-tech industries, especially high-tech services, keep growing quickly, while sources of foreign investment also expand. Actual use of foreign capital in the services sector rose 51.5% year-on-year to CNY237.79 billion during the first quarter. The high-tech sector’s actual use of foreign capital expanded 32.1% on a yearly basis. The year-on-year growth in high-tech services was 43.9% and in high-tech manufacturing sectors 2.5%. As for the investment sources, inflows of foreign capital from countries participating in the Belt and Road Initiative (BRI) increased by 58.2%, from members of the Association of Southeast Asian Nations (ASEAN) by 60% and from nations of the European Union by 7.5% on a yearly basis in the first quarter.
The total imports and exports of goods surged 29.2% year-on-year in the first quarter to CNY8.47 trillion. Exports jumped 38.7% from a year earlier and imports climbed 19.3% in yuan terms. The trade surplus expanded 690.6% to CNY759.29 billion. In March alone, China’s exports in dollar terms soared 30.6% in March from a year earlier while imports jumped 38.1%.
China-U.S. trade increased by a striking 61.3% in yuan terms in the first quarter of this year to reach CNY1.08 trillion. This growth outpaced all of China’s other major trading partners including Japan, the EU, and ASEAN. The U.S. trade deficit with China reached CNY472 billion in the first quarter. China’s trade with the EU and ASEAN economies rose 36.4% and 26.1% in the first quarter.
This overview is based on reporting by the China Daily, Shanghai Daily and Global Times.
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