Volunteers wearing personal protective equipment (PPE) arrange food deliveries on Nov. 26, 2021, for a Shanghai residential area that’s under restrictions to halt the spread of Covid-19.
Yin Liqin | China News Service | Getty Images
BEIJING — China’s economy grew by 8.1% in 2021, and industrial production rose steadily through the end of the year and offset a drop off in retail sales, according to official data from China’s National Bureau of Statistics released on Monday.
Fourth quarter GDP rose by 4% from a year ago, according to China’s National Bureau of Statistics. That’s faster than the 3.6% increase forecast by a Reuters poll. For the full year, China economists expected an average of 8.4% growth in 2021, according to financial data provider Wind Information.
Industrial production rose by 4.3% in December from a year ago, the bureau said, also beating Reuters’ forecast of 3.6% growth.
However, retail sales missed expectations and grew by 1.7% in December from a year ago. Analysts polled by Reuters had predicted a 3.7% increase.
“We must be aware that the external environment is more complicated and uncertain, and the domestic economy is under the triple pressure of demand contraction, supply shock and weakening expectations,” the bureau said in a statement.
Fixed asset investment for 2021 grew by 4.9%, topping expectations for 4.8% growth.
The urban unemployment rate in December matched the average for the year of 5.1%. The unemployment rate for those aged 16 to 24 remained far higher at 14.3%.
China’s zero-Covid policy
China’s zero-Covid policy aimed at controlling the pandemic prompted renewed travel restrictions within the country — including the lockdown of Xi’an city in central China in late December.
In January, other cities were also locked down in full or partially, to control pockets of outbreaks tied to the highly transmissible omicron variant. Analysts have started to question whether the benefits of China’s zero-Covid strategy outweigh the costs, given how contagious and potentially less fatal the omicron variant is.
Goldman Sachs cut its forecast for China’s 2020 GDP growth based on expectations the zero-Covid policy will cause increased restrictions on business activity. However, the analysts said the greatest impact would be on consumer spending.
Retail sales dropped in 2020 even though China’s overall economy grew amid the pandemic. Consumer spending has since remained sluggish, partly as travel restrictions have kept a damper on tourism.
Business employees’ incomes generally went up between 2020 and 2021, especially in labor-intensive industries like catering and manufacturing, Christine Peng, head of Greater China consumer sector at UBS, said during a media call last week.
But she noted that rising uncertainty has resulted in consumers delaying purchases of discretionary goods, such as new air conditioners. Peng said consumers were also thinking longer term, and that within households, female consumers were more willing to buy insurance or other financial management products.
China’s gross domestic product grew by 2.2% in 2020 from the prior year. That’s according to the latest figures from the National Bureau of Statistics, which in December released an annual data revision that reduced 2020 GDP growth by 0.1 percentage point.
Compared with the initial release earlier in 2021, real estate, transport industries and accommodation and restaurants saw the greatest downward revision. Renting, leasing activities and business services saw the greatest increase, followed by manufacturing.
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