China's Economic Strength to Continue Into 2021

 China's Economic Strength to Continue Into 2021

China was the first country to suffer from the coronavirus, but it recovered in time to have its manufacturing capacity up and running as the virus spread across the globe. The demand for personal protective equipment (PPE), computers, and everything else helped power China's economic recovery in 2020 and position the country to continue its strong growth into 2021. We'll look at how this happened and what it means for the market.To get more Shanghai economy news, you can visit shine news official website.

While the other major economies in the world ended 2020 still grappling with the coronavirus and shuttering segments of the economy to prevent further spread, China's economy expanded 2.3% in 2020.1 This comes at a time when the World Bank projects that most economies are destined for years of muted growth following a significant decline in real terms in 2020.

China's 2.3% overall growth is more impressive when seen in context. China's gross domestic product (GDP) contracted 6.8% in the first quarter, increased by 3.2% in the second quarter, increased again by 4.9% in the third quarter, and then ended the year by surging 6.5% in the fourth quarter. Although the virus knocked China's economy off its rapid growth, resulting in a year in which its overall growth fell below its own standards, the successive increases within 2020 have essentially brought China back to its pre-pandemic position faster than any other nation.

The reasons behind this rapid snapback owe less to the stimulus propping up many of the other large economies and more to the fact that China was able to get its factories up and running. As the coronavirus spread across the globe, manufacturing capacity and supply chains outside China started to fall apart. This cemented China's role as the manufacturing floor of the world as it was able to churn out PPE and other finished goods on the strength of domestic supply chains and capacity. Put simply, when demand was at its highest for certain products, the only consistent suppliers were based in China.

Growth prospects for China going into 2021 are similarly high. The International Monetary Fund (IMF) projects China's 2021 growth at a staggering 8.1%, well ahead of the United States at 5.1% and second only to India with a projected 11.5% growth.2 In addition to incredible growth, China has also surpassed the United States in terms of attracting foreign direct investment (FDI).3 

While some companies have reacted to coronavirus disruptions by reshoring operations closer to their largest customer base, others saw how China's integrated manufacturing hubs with all elements of the supply chain regionally located were able to continue production throughout the pandemic. This has led some businesses to accelerate investment in China, redefining operations there as their main production sites. The two approaches are pulling in different directions, with some companies reshoring and others offshoring, but China has seen more investment come in than flow out. This trend will continue throughout 2021 and will likely outlast the coronavirus pandemic that precipitated it.