By Jonathan Cheng
BEIJING--China's geopolitical rise over the past four decades
has been fueled by sizzling economic growth that regularly featured
years of double-digit percentage-point gains.
In 2020, China advanced its aspirations by simply emerging with
its growth intact from a brutal year when a pandemic shook the
On Monday, Beijing said its gross domestic product rose 2.3%
last year. While that is the weakest annual rate of growth since
the Mao era, it was enough to make China the only major world
economy to gain any ground at all last year, and accelerated its
likely overtaking of the U.S. economy, economists say.
The World Bank projects the global economy to have pulled back
by 4.3% last year, dragged down by a 7.4% contraction in the
eurozone. The U.S., the world's largest economy, is expected to
have shrunk by 3.6%.
In per-capita terms, China's GDP, which surpassed $10,000 for
the first time this year, remains far behind the U.S.'s $65,000.
But the sheer size of its market, combined with its weathering of
the worst economic downturn in memory, means that China is arguably
entering the new year with a stronger hand--an advantage that
leader Xi Jinping is expected to make use of after President-elect
Joe Biden is sworn into office on Wednesday.
China was able to rescue its economy by aggressively moving to
stamp out the virus--though only after several critical weeks in
which authorities were initially slow to act as it spread in the
central Chinese city of Wuhan.
By the time Western countries were hit with the first wave of
infections in the spring, China's formidable factory floor was
revving back up again, helped by government measures targeted at
restoring industrial production. Chinese exports, together with
ramped-up infrastructure spending, powered a recovery that steadily
picked up steam throughout the year. Officials said last week that
exports in 2020 climbed to an all-time high.
After suffering a 6.8% contraction in the first three months of
the year, China's economy notched three quarters of progressively
stronger gains, culminating in a 6.5% expansion in the final three
months of the year, officials said Monday--putting China back on
its pre-Covid-19 trajectory.
"We had a perfectly V-shaped recovery profile in China, whereas
the U.S. looks more like a W," said Michael Spencer, chief
Asia-Pacific economist for Deutsche Bank. "It will have taken the
U.S. a year longer than China to get back to the pre-Covid
In getting back to normalcy well ahead of the Western world, the
world's second-largest economy has gained significant ground on the
U.S., while helping the globe avert what would have otherwise been
an even grimmer year.
China's increase in its share of global GDP last year--1.1
percentage points--marks its largest such jump in a single year
since at least the 1970s.
Forecasters now expect China's economy to grow by another 8% or
more in 2021, helping put it on track to overtake the U.S. as the
world's largest economy by 2028, as many as five years earlier than
"China's exceptional economic performance during the pandemic
has caused the gap to shrink," Axel Weber, chairman of UBS Group
AG, said last week.
Mr. Weber, citing International Monetary Fund data, has moved
forward his projected timeline for China's economy to reach parity
with the U.S. to 2028, from an earlier forecast of 2030.
The Centre for Economics and Business Research, a London-based
research firm has also moved up its forecast for the day of parity
to 2028, albeit from a pre-coronavirus projection that China would
surpass the U.S. in 2033.
That expedited timeline is based in part on China's robust
industrial rebound last year--but, equally importantly, on Beijing
refraining from joining the Federal Reserve and other global
central banks as they took rates to near-zero levels.
China's higher interest rates attracted a flood of capital,
buoying the yuan against the greenback and increasing the value of
China's economic activity in U.S. dollar terms, said Douglas
McWilliams, CEBR's deputy chairman.
More than merely bringing the size of China's economy more
quickly to parity with that of the U.S., China's exceptional 2020
performance also helped the global economy as a whole.
Without China's contribution, says Homi Kharas, a senior global
economics and development fellow at the Brookings Institution, the
world economy would have shrunk by 5.7% last year, versus the
roughly 4.3% pullback now expected by the World Bank.
Mr. Kharas, a former World Bank chief Asia economist, says that
while global growth has enjoyed an average annual boost of about
0.8 percentage points from China over the past two decades, China's
relative outperformance last year means that it likely lifted the
global economy by "nearly double its usual contribution"--roughly
1.5 percentage points, by his calculations.
Mr. Kharas says China's 2020 expansion means the economy could
eclipse the U.S.'s in size even before 2028 if the yuan continues
to strengthen against the dollar.
Economists are divided over how long China's advantage will
persist. Deutsche Bank's Mr. Spencer argues that the U.S. is likely
to regain ground on China in the next few years as Beijing, having
tackled the Covid-19 emergency, resumes its pre-pandemic campaign
to rein in debt--which ballooned again in 2020.
At the same time, he expects the U.S. to enact bolder stimulus
in the coming months, with a Democratic Party-controlled Congress
aggressively intervening to prop up consumer spending.
"If we define recovery as getting back to the pre-Covid
trajectory, China is about a year ahead of the U.S., but the
stimulus will be much bigger in the U.S.," Mr. Spencer said.
In the longer run, some economists are concerned about China's
reliance on less efficient state-owned enterprises to drive the
recovery, a formula that the IMF has warned is dragging down
China's productivity--and its longer-term economic fortunes.
For now, though, some Chinese businesses are bracing for a
bumper harvest after the tumult of 2020.
In the southern Chinese metropolis and export hub of Guangzhou,
Serenity Made Furniture Co., a maker of furniture for restaurants,
hotels and bars, has been scrambling to keep up with a torrent of
When the coronavirus first convulsed China a year ago, Serenity
Made's factory was forced to shut down operations for several
nerve-racking weeks. By the time China's aggressive pandemic
response allowed the factory to reopen, business travel and
restaurant dining had been wiped out in other parts of the
As clients canceled contracts and overseas orders plunged to
effectively zero between mid-March and the end of May, two of
Serenity Made's five salespeople quit, company director Serina Yang
In June, some countries that managed to bring the coronavirus
largely under control--Australia, New Zealand and Singapore--began
easing social-distancing restrictions, sparking a rebound in orders
that brought business volume at Serenity Made, which employs
roughly three dozen people, back to pre-coronavirus levels by
With many of her competitors in Southeast Asia still grappling
with their own factory shutdowns and supply-chain issues, Ms. Yang
was able to claw away market share, helping Serenity Made finish
2020 with sales 30% higher than the year before.
Ms. Yang hired temporary workers in the second half of 2020 to
keep the company's three production lines in nearby Foshan running
at full capacity.
Now, as vaccines are rolled out in the Western world, Ms. Yang
is preparing for demand to double amid an expected snapback in air
travel and restaurant and bar spending in the second half of the
"Our order book is packed," Ms. Yang said. "We are extremely
Grace Zhu and Bingyan Wang contributed to this article.
Write to Jonathan Cheng at email@example.com
(END) Dow Jones Newswires
January 18, 2021 06:05 ET (11:05 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.