Cao Heping

National Bureau of Statistics of China announced the preliminary calculation of GDP in 2020, “at constant prices, China’s GDP increased by 2.3% over 2019,” hitting the lowest point since the reform and opening up. Looking back over the past 42 years, the country’s GDP, 278 times that of 1978, has grown at an average annual rate of over 14%. This is definitely a remarkable achievement for a developing economy with a population of more than 1.4 billion, which is 200 million more than the total population of the 26 developed countries in the world. With the Covid-19 pandemic still raging across the world, whether China will maintain the driving mechanism for such phenomenal economic growth in 2021 has attracted much attention. The Statistical Communique of the People’s Republic of China showed that on a quarter-on-quarter basis, the growth rates of China’s economy in the four quarters of 2020 were -9.7%, 11.6%, 3.0% and 2.6% respectively; on a year-on-year basis, the growth rates in the four quarters were -6.8%, 3.2%, 4.9% and 6.5% respectively. The two sets of figures clearly indicate China’s V-shaped recovery. The growth rate in the fourth quarter of 2020 was 0.5 percentage point higher than that in the same period of 2019 when the pandemic hadn’t broken out. This is an unmistakable signal of full economic recovery after the short-term impacts of the pandemic had been effectively contained. Whether the driving mechanism behind the statistics has remained unchanged is a question worth considering. According to the communique, in 2020, it was the information transmission, software service and information technology industry that had led the economic growth, with a year-on-year growth rate of 16.9%. The online sharing economy supported by digital technology has played a crucial role in mitigating the impacts brought by the pandemic on the real economy, which is reflected by the rapid development of the information transmission, software services and information technology industry in the statistical caliber. In addition, the communique discloses that China’s financial industry has maintained steady and sustainable growth. The two industries together have contributed to 54.1% of economic growth. The steady growth of the high-tech industry and financial service industry reflects that the leading industries in the national economic system lie in the technological innovation intensive and high-end service sectors, and confirms China’s shift from an investment-driven and export-oriented growth mechanism to a demand-led and innovation-driven one. Now, let’s turn to the overall economic situation from the sectors that serve as the driving mechanism in the national economic system. We find that although the Covid-19 pandemic continues to rage across the world, the consumer demands in China remain strong. During the Mid-Autumn Festival and the National Day holiday in 2020, the total retail sales of social goods hit a new high. The transaction volume at the subsequent CIIE exceeded that of the previous years, and the shopping bonanza on the Singles’ Day (“Double 11”) smashed all spending records once again. All these indicated Chinese consumers’ high expectations. Although China was the first to be attacked by the Covid-19 pandemic, thanks to the concerted efforts of the nation, people, medical and scientific personnel, its economy stayed resilient in mid-March last year because it had completely curbed the recurrence of the pandemic. Moreover, cases of imported infection in different places and signs of pandemic recurrence have been tackled promptly. “Many individuals and households have experienced setbacks and obstacles amidst the impact of the pandemic. Last year, some people failed to get a wage rise, other people’s income dropped, some small businesses in the service industry were closed, and the number of the unemployed increased.” However, these facts haven’t destroyed Chinese consumers’ confidence in economic growth in the future from the perspective of sustainable macroeconomic development. With such confidence, considering that the service industry has contributed more than two-thirds to China’s economic growth in recent years, the huge potential for economic growth in the new year remains there. We can also catch a glimpse of China’s economic growth momentum by comparing it with the development of other economies worldwide. Recently, various countries have successively announced economic growth rates in 2020. The figure for Germany that has done relatively well in pandemic control among developed economies is -5%. That for America is predicted to be -3.6%, while those for the UK and France are -10.3% and -9.4% respectively. According to the current pandemic control and the number of newly confirmed cases per day, these major economies will be able to fully control the pandemic in the second quarter of this year, when mass consumption activities will come back, and the economy related to Fangcang hospitals and industries such as transportation, logistics and tourism that are closely related to the pandemic will reopen. This is the best scenario. Even so, it may be impossible for them to return to normal growth levels until or even after the end of this year. China, Japan and South Korea in East Asia are the world’s major manufacturers and suppliers, as well as the initial security links connecting players on the global supply chain that provide support and material supply in the fight against the pandemic. China’s exports have not only made contributions to the world, but also laid a solid foundation for the expected stable growth in imports and exports this year. In terms of technological potential, intelligent digital economy plays a prominent role worldwide. In China, following the rapid growth of the B2C model of the online sharing economy in the past few years, workshops related to Industry 4.0 have accumulated sufficient potential for upgrading and technological breakthroughs in recent years. Besides, the fast development of the intermediate goods market (the B2B market) has put the intelligent machine manufacturing and market management on the fast track. In 2021, many scientific and technological forecasts believe that China’s four major types of intelligent machine manufacturing, namely robotic arms, humanoid service robots, AR components and cyber robots, may become new growth engines under the strong national support for digital infrastructure construction. Last but not least, China has a unique advantage formed in its long history, namely pooling efforts to accomplish major and concrete tasks that will benefit people. In the pandemic, the advantage has once again proved to be a driver for growth under the leadership of the Communist Party of China. Effectively aligning the combination of traditional monetary and fiscal policies with the policies that focus on digital infrastructure construction will provide sufficient and abundant sources of potentials for China’s economic growth. With the pandemic continuously raging across the world in 2021, the uncertainties in international political and economic development remain there, and China is still faced with the arduous task of reform. However, considering all the factors, China’s economic growth has returned to the normal potential level. Given the low growth rate of 2.3% in 2020, that in 2021 will surely show a tail-up tendency. I estimate that with the normal annual growth potential and the tail-up factor, China’s economy will grow by over 8% in 2021. (Author: Cao Heping, Professor and Doctoral Supervisor of School of Economics, Founding Director of the Department of Resources, Environment and Industrial Economics at Peking University, Vice President of China Association for Political Economy, Vice President of Association for Promotion of West China Research and Development, Director of Green Finance Sub-society of Chinese Society for Environmental Sciences, Economic Consultants for Several Provinces and Cities)