China's economic recovery to quicken in fourth quarter, herald stronger 2021

BEIJING (Reuters) - China’s economic recovery likely accelerated in the fourth quarter, driven by stronger demand at home and abroad and policy stimulus which is expected to provide a solid boost into 2021.

People wearing face masks following the coronavirus disease (COVID-19) outbreak walk past shops along Yandaixiejie alley, in Beijing, China January 16, 2021. Picture taken January 16, 2021. REUTERS/Tingshu Wang

The gross domestic product (GDP) numbers, due early on Monday, will be closely watched around the world, especially as many countries continue to grapple with the COVID-19 pandemic and China battles resurgent cases in parts of the country.

Analysts polled by Reuters forecast GDP grew 6.1% in October-December from a year earlier, accelerating from the third quarter’s 4.9% pace.

That would bring its full-year expansion to 2.1%, likely making China the only major economy to see growth last year but still the country’s weakest pace in more than four decades.

Aided by strict virus containment measures and emergency relief for businesses, the economy has recovered steadily from a steep 6.8% slump in the first three months of 2020, when an outbreak of COVID-19 in the central city of Wuhan turned into a full blown epidemic.

On a quarterly basis, growth likely quickened to 3.2% in October-December from 2.7% in the previous quarter, the poll showed.

China will release fourth-quarter and 2020 gross domestic product (GDP) data on Monday (0200 GMT), along with December

factory output, retail sales and fixed-asset investment.

Data on Thursday showed Chinese exports grew by more than expected in December, as coronavirus disruptions around the world fuelled demand for Chinese goods even as a stronger yuan made exports more expensive for overseas buyers.

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China also bought record volumes of crude oil, copper, iron ore and coal in 2020.

Analysts expect economic growth to rebound to 8.4% in 2021, before slowing to 5.5% in 2022.

While this year’s predicted growth rate would be the strongest in a decade, led by a big jump in the first quarter, it is rendered less impressive coming off the low base set in pandemic-stricken 2020.

Some analysts also cautioned that a recent rebound in COVID-19 cases in China could impact activity and consumption in the run-up to next month’s long Lunar New Year holidays.

China reported the highest number of daily COVID-19 cases in more than 10 months, official data showed on Friday, due to a severe outbreak in the northeast that has put more than 28 million people under lockdown.

The International Monetary Fund said this month that China should maintain some policy support for the economy this year, but steps are needed to spur private demand and achieve more balanced growth over the medium term.

Chinese leaders pledged at a key agenda-setting meeting last month to maintain “necessary” policy support for the economy

this year, while avoiding a sudden policy shift.

The central bank will scale back support for the economy in 2021 and cool credit growth, but fears of derailing the recovery and debt defaults are likely to prevent it from tightening anytime soon, policy sources said.

The central bank has rolled out a raft of measures since early 2020 to support the virus-hit economy, alongside targeted support for small firms and increased government spending on infrastructure.

Reporting by Kevin Yao; Editing by Kim Coghill