Bank of Korea Analysis of China’s Economic Outlook for 2021
8% high growth out of the aftereffects of Corona 19
Major international economic groups also expect high growth
It is predicted that the Chinese economy will grow to 8% next year. According to the ‘2021 China Economic Outlook and Major Issues’ published in the Bank of Korea’s Overseas Economy Focus on the 27th, the Chinese economy has slowed significantly this year due to the spread of new coronavirus infection (Corona 19) and global uncertainty, but recent consumption, etc. The recovery trend was found to have accelerated, centering on domestic demand.
The growth rate of the Chinese economy’s gross domestic product (GDP) slowed from 6.1% last year to 0.7% in the first and third quarters of this year. However, it is expected to record an 8% growth rate next year. This is from the observation that the global economic recovery, consumption recovery in earnest, manufacturing investment expansion, and the base effect of the previous year will continue a rapid recovery trend.
Among the major institutions, the International Monetary Fund (IMF) predicted that China’s economic growth rate will surge from 1.9% this year to 8.2% next year. The Organization for Economic Cooperation and Development (OECD) suggested 1.8% this year and 8.0% next year. The eight investment banks forecast the growth rate of the Chinese economy at 2.2% this year and 8.3% next year.
It is analyzed that the Chinese renminbi will continue a strong trend next year. The yuan-dollar exchange rate soared to 7.16 yuan in May, then plunged more than 8% to 6.53 yuan as of mid-month. It was analyzed that the Chinese economy’s growth and the US dollar’s weakening trend due to the increase in the US fiscal deficit would act as pressure for the yuan to strengthen.
However, the Chinese government’s wary of expectations of appreciation and the possibility of reproducing the trade conflict between the US and China were pointed out as factors limiting the decline (stronger) of the renminbi’s exchange rate.
There were also observations that the government of the government could gradually normalize the fiscal and monetary policy operations next year. The BOK predicted that “while the Chinese government properly adjusts its liquidity level in consideration of the economic recovery trend, it will pay attention to financial stability in response to increased corporate defaults.”
Meanwhile, the Japanese economy is forecast to show a growth rate of 2-3% next year. However, it is predicted that the improvement will be modest due to uncertainties about the re-proliferation of Corona 19. This year, the Japanese economy is expected to record a growth rate of -5% to -6%.
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