A reading of the steady performance of China's economy in 2020

Editor's note: Chen Jiahe is the chief investment officer at Novem Arcae Technologies. The article reflects the author's opinions, and not necessarily the views of CGTN.

No one doubts today that the year of 2020 has been an extraordinary and challenging year for all economies around the world. The impact of the COVID-19 has become even larger than the impact caused by the trading conflict between the US and China. In this difficult year, the performance of the world's second largest economy, China, has been remarkable. The just released economic data reveals this fact to the market.

With the economic annual report published by the National Bureau of Statistics (NBS) of China, the total economic scale of China reached approximately 101.6 trillion Chinese yuan in 2020, the highest level in its own record. Taken inflationary factor into consideration, the GDP of China in 2020 is 2.3 percent higher than that of 2019. Considering the complicated economic situation in 2020, such a number (101.6 trillion) means a way better economic performance than a previously negative anticipation held by most market participants.

The growth rates of China's GDP in the four quarters of 2020 are -6.8 percent, 3.2 percent, 4.9 percent and 6.5 percent, respectively, and the data of the last quarter reaches China's potential economic growth rate.

As the overall economic growth of China now returns to a normal level, the inflationary pressure has been well contained. China's CPI in 2020 has been 2.5 percent, 0.4 percent lower than that reported in 2019. In the classical economic theory, an inflation rate between one percent and three percent is considered as a healthy level. An excessively high or low inflationary level would cause a price disturbance or deflation, which can both be dangerous for a country's economy.

Within the categories of consumer prices, the pork price still contributed strongly to the inflation of China as it increased by 49.7 percent in 2020. Due to the fact that pork is the main part in Chinese people's daily consumption, the soaring pork price indicates a heavy pressure has been put onto the inflationary data.

On the other hand, if the pork price can be well controlled in 2021, the inflationary pressure of the Chinese economy would be even lower, which can leave the government enough space to implement more monetary policy to boost Chinese economy.

The stunning economic progress made by China has benefited its people. The unemployment rate, as reported by the NBS, has remained at 5.2 percent, which is the same as that in 2019. The national average level of disposable income was 32,189 Chinese yuan, 4.7 percent more than the level reported in 2019. Meanwhile, citizens living in the rural area have enjoyed a 6.9 percent growth rate for their disposable income, meaning that the income inequality between urban and rural areas has been slightly reduced.

When fighting against the COVID-19 has been the priority task for most of major economies in the world last year, the international trade between China and the other economies has become a vital part. The released data shows that the total amount of China's international trade has reached 32 trillion Chinese yuan in 2020, 1.9 percent higher than that of 2019.

The rising volume in China's export contributes mostly to the aforementioned rising international trade amount, which rose by 4.0 percent in 2020 compared with that one year ago, while the import volume of 2020 has dropped by 0.7 percent compared with statistics of 2019.

When reading the data of international trade in 2020, one thing has to be mentioned is that the data is calculated by using the local currency, the Chinese yuan. If the U.S. dollar is used as the benchmark, then the international trading data of China will be much better in 2020, as the exchange rate between the U.S. dollar and the Chinese yuan has dropped by 6.1 percent in 2020 from the initial level of 6.9662 to 6.5398.

The strengthening of the Chinese yuan in 2020 comes directly from China's economic competence amid this global pandemic. The strong support that the Chinese economy has provided to the other economies has been very helpful in 2020.

As the pandemic has had huge impact on people's daily life, the domestic consumption in 2020 has become rather different. On one hand, the overall domestic consumption in 2020 was 39 trillion Chinese yuan, 3.9 percent lower than that of 2019. On the other hand, the online consumption value has increased by 10.9 percent in 2020.

Good news for the overall consumption is that as the COVID-19 is gradually being curbed, the overall consumption growth rate is now picking up and reaches 4.6 percent in the fourth quarter of 2020, 3.7 percent higher than the level in the third quarter. The continuous recovery of the consumption can be a positive support to the Chinese economy in 2021.

Overall, the steady performance of China's economy in 2020 has provided a solid foundation for better economic growth in 2021. The fighting against COVID-19 is now providing an even more reliable environment for the world economic recovery.