China's Record First Quarter Fuels Strong Expansion In 2021

China’s 1st quarter record performance will accelerate momentum in China and support recovery in the US and global economic prospects – as long as unwarranted geopolitical tensions remain in check.

A year ago, China’s first-quarter plunge was -6.8 percent, due to the pandemic effect. In the West, it was widely seen as the “end of China's growth story.”

Instead, in early February 2020, I predicted a turnaround in the increase of new virus cases in China, with the beginning of the economic rebound in the second quarter. Following the 6.5 percent expansion in the fourth quarter of 2020, the GDP rose to a record 18.3 percent year-on-year in the past quarter.

Obviously, the performance benefited from the base effect, due to the pandemic plunge a year ago. Nonetheless, it reflects a strong impetus for normalization.

several cargo containers

Image Source: Unsplash

Expansive momentum from manufacturing to services

The strategic rebound effort began with supply-side expansion. Now it is broadening, thanks to improving domestic demand and higher exports.

All major indicators are already above the pre-crisis level. The Purchasing Managers’ Index (PMI) has grown 13 months in a row. Production of machinery and healthcare-related products continue to show strong growth.

As the supply-side performance is driving a turnaround in consumption, even the services PMI has been expanding for almost a year.

With the easing of social distancing, retail sales, which have been expanding for 8 months, are likely to strengthen. Due to new variants and lingering pandemic waves in many parts of the world, international travel restrictions are likely to foster domestic spending in the Chinese mainland.

After the severe pandemic-induced economic plunge, the international auto sector is recovering with US retail sales at 26 percent in the first quarter. However, China’s auto production has increased for 12 months at over 40 percent year-on-year.

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Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at the India, China and America Institute (USA), Shanghai ...

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