China GDP Grows 8.1% in Calendar Year 2021

Among the large economies in the world, one of the most awaited GDP numbers is the Chinese GDP. After all, China accounts for more than 50% of the world demand for steel aluminium, copper and zinc. Name any capital equipment or consumer item and China would be the largest demand repository. That is what makes Chinese growth so important to the world.

For the year 2021, China reported GDP growth of 8.1%, which is better than what the consensus estimates were pencilling. The industrial production in the fourth quarter recovered sharply and offset the weak retail sales in China. Fourth quarter GDP was up 4% YoY and that is nearly 40 bps better than what Reuters had estimated.

For over 30 years now, China has been the factory to the world and accounts for bulk of the industrial output growth in the world. It was gratifying to note that industrial output rose 4.3% in the month of December with auto sales growing 3.4%. The industrial production is nearly 70 bps above the consensus estimates while the auto sales saw its first positive growth in the last 9 months in December. Overall tidings appear to be good for China.

While industrial production tends to be a historical number, what is more futuristic is the growth in manufacturing investments. In the year 2021, the manufacturing investments were up by a whopping 13.5% indicating that the Chinese economy had managed to put the COVID woes behind them and decided to move on with business as usual.

The rather surprising disappointment for the Chinese economy was the retail sales growth for December 2021, which grew by just about 1.7% as against the Reuters Analyst Poll peg of 1.7%. The actual numbers were lower by nearly 200 bps. This has coaxed the People’s Bank of China to cut the medium term rates for the first time in the last 21 months since the COVID pandemic struck the globe.

One big challenge is that China has adopted a zero-COVID policy and that has not only been constraining demand but has also created supply chain constraints in the process. The result has been that while joblessness has been relatively high at 5.1% in 2021, the joblessness is more pronounced at 14.3%, if you just consider the 16-24 age group.

However, it must be remembered that when it comes to economic data, Chinese data can be extremely slippery. For example, for the year 2020, the original GDP growth was pegged at 2.2%. However, this year that 2020 GDP growth was revised lower to 0.1%. It remains to be seen how much the GDP for 2021 is vulnerable to lower shifts.

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