Despite a pandemic, tariffs and superpower political tensions, the resilience of the Chinese economy was clear in 2020. With COVID-19 largely under control, economic rebalancing towards domestic demand continued, and the Chinese consumer emerged from lockdown, ready to spend. In the fourth quarter of 2020, overall real retail sales and new home sales both rose at faster rates than a year earlier. In this issue of Sinology, we highlight five macro trends from 2020 that investors should watch this year.
1) China was likely the only major economy to grow in 2020, highlighting the importance of bringing COVID-19 under control.
While the importance of controlling COVID-19 isn’t a surprise, it is surprising how few governments accepted that early, aggressive policies to deal with the pandemic were the best way to save lives and get an economy quickly back towards normal.
I expect an almost immediate, modest improvement in U.S.-China relations, because I expect President Biden to abandon the last administration's approach of treating the Chinese government as an enemy.
In the April 17, 2020 issue of Sinology, we explained that “China appears to have brought COVID-19 under control and laid the foundation for a gradual economic recovery,” and that, “when thinking about prospects for the Chinese economy, one of the most important factors is whether the coronavirus remains under control.”
While the Chinese authorities continue to battle relatively small COVID outbreaks, a year after an initial cover-up and nearly 5,000 deaths, China is one of a handful of countries that have controlled the virus well enough to get economic growth back on track. This is an important lesson as we look ahead to the Biden administration’s more aggressive approach to fighting COVID in the U.S.