Chinese stats official warns against excessive economic optimism

BEIJING, Feb 5 (Reuters) - An official from China’s statistics agency warned against heightened optimism about the economic outlook, saying the impact of COVID-19 was likely to distort first quarter growth figures, state media reported on Friday.

Sheng Laiyun, a vice head of the National Bureau of Statistics, told China News Service the large economic slump in the first quarter last year caused by the pandemic created a significant base effect that would likely lead to a rapid jump in growth in the first three months of this year.

“We should not be too optimistic about China’s economic situation in 2021, but should still be clear-headed,” Sheng said.

The world’s second-largest economy shrank 6.8% in the first quarter of 2020 as the coronavirus paralysed factory activity and the movement of people, however, it has since staged an impressive recovery thanks to stimulus and strong export demand.

Sheng also disputed forecasts by some institutions of 18-20% expansion in the first quarter, saying they are “not very scientific”. He did not give his own forecast.

Small and scattered COVID-19 outbreaks in China could dent economic activity although the impact would be smaller than last year, Sheng said.

Authorities imposed a series of local lockdowns in January to contain small-scale outbreaks in northern China in the country’s worst coronavirus wave since March 2020.

However, Sheng expects China’s economic recovery to remain intact thanks to local virus controls and as other countries retain stimulus policies.

China’s economic growth is forecast to quicken to 8.4% this year - led by an expected double-digit expansion in the first quarter, from 2.3% in 2020, according to a Reuters poll of economists.

Sun Guofeng, the head of the central bank’s monetary policy department, wrote in an article seen on Wednesday that first-quarter growth in bank loans, money supply and total social financing could slow due to a higher base for comparison.

That would deviate from faster economic growth, but credit support will remain stable, Sun wrote in China Finance magazine.

China will likely avoid setting a 2021 growth target, dropping the closely watched measure for a second straight year on concerns that maintaining one could encourage provincial economies to ramp up debt, policy sources told Reuters. (Reporting by Kevin Yao; Editing by Sam Holmes)