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China sees record leap in economic growth since 1992


China has seen a massive leap in economic growth in the first quarter of 2021 of 18.3%, compared to that of last year.


Despite the large growth, the figure fell short of estimates conducted by Reuters and Wall Street Journal, who predicted growth to be at 19% and 19.2% respectively.


Nevertheless, the astronomical growth is the largest increase in economic growth which China has seen since 1992, the year when the nation began to record its figures.


However, the yearly comparison in GDP may be seen as misleading, this is because the COVID-19 Pandemic began almost one year ago.


For this reason, China experienced a large contraction in January of last year, because of this, the new year on year GDP figure seems a lot more promising than it actually is.

The contraction is a direct result of the loss of output attributed to the COVID-19 Pandemic which inhibited China’s ability to be the workshop of the world due to the public health risks and human loss.


Nevertheless, the large comparison in growth should not completely take away China’s efforts at economic recovery, either way, the growth is impressive, however, it should be known that this figure is somewhat of an anomaly due to last years contraction.


Reports say that the GDP YoY growth rate will, with a high probability, begin to trend lower in succeeding quarters.


This is because the Chinese economy will begin to normalise again, and, it will be also difficult for the nation to beat an increase of 18.3% without a black swan event occurring again.


If we look at the QoQ figures, we see that China’s growth has recently been on a downwards trend.

As shown in the figure above, economic growth in China has recently slowed down to 0.6% from its 3.2% level in the previous quarter.


According to the Financial Times, this growth figure was well below expectations and quite underwhelming for the Chinese economy.


However, both FT and the BBC have stated that China is on track for gaining its momentum and regaining previous levels of growth in the first half of this year.


China’s history has been one of extreme momentum and fast-paced growth led by an increasingly industrial nation.


As China’s populations begin to urbanise however, the large industrial prowess of the nation may cause a setback.


This is because people who urbanise typically demand higher incomes, yielding a rise in the standard of living.


So, it will be likely that the Chinese population may soon begin demanding much cleaner air quality on a large scale.


Because of this, China’s largest threat, aside from geopolitical ones such as American tariffs, is climate change, especially air quality.


If China does not improve its air quality by reducing emissions, the Chinese population will likely see severe public health issues.


This is extremely undesirable for the Chinese government as the longer people are sick, the less they can work, meaning the output per worker has decreased.


This decreased output may lead to a contraction in the productive capacity of the economy.


However, the CCP already acknowledges this issue as the Chinese government has plans on improving air quality by freezing growing emissions by 2030 and then halting them in 2060.


So, if China tackles its climate problem, and if national schemes such as the “Belt and Road” initiative are successful, the likelihood is that the Chinese economy will be extremely prosperous indeed.

 

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Research compiled by Billy Ryan.

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