Chinese Economy, Priorities For 2021

China intends to earmark spending for education, employment, social welfare, public health and culture

Morgan Stanley | With growth already at pre-Covid levels, China has announced its priorities: a gradual exit from stimulus, internalisation of the yuan and reduction of carbon emissions. These are our predictions:

  1. Foreign Exchange reserves of $3,190 bn (vs $ 3,178 bn in November 2020)
  2. Headline inflation from -0.5% to 0%.
  3. Credit growth down 0.1% to 13.6%.
  4. Export growth of 17% in December
  5. Industrial production flat at 7% YoY.
  6. Investment in real estate reaching 3.3% in 2020
  7. Retail sales accelerating to 5.5% in December (vs. 5% in Nov

Strategists estimate that the deficit will fall to 12% of GDP, after reaching a record high of 15.4% in 2020. But still above 9.9% in 2019. The government intends to earmark spending for education, employment, social welfare, public health and culture, suggesting that the debt-to-GDP ratio will stabilize at over 64-65%, after rising 7 percentage points last year. On the other hand, the deal signed on December 30th with the European Union points out China’s determination to strengthen trade and foreign investment– Also to maintain the supply chain by relaxing market access restrictions and incorporating provisions to maintain the level-playing field.