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nomic recovery We will likely see the dual circulation strategy play
out in mega-regions, such as the Yangtze River Delta,
China staged an impressive recovery in 2020 – as well as economic policies that aim to stimulate
exhibiting a 2.3 percent GDP growth, despite the domestic economy through innovative measures
prolonged lockdowns and a nationwide economic lull ranging from subsidies for replacing old home
in Q1. appliances to slashed taxes on used cars to make
purchasing new items accessible to all consumers.
Foreign trade totaled RMB 32.16 trillion (US$4.96
trillion), an increase of 1.9 percent from the previous Fiscal and monetary policies
year. This was driven largely by exports of medical
supplies and masks, which drove the first uptick in In 2020, China walked a fine line between offering
April. Further, fixed asset investment increased by financial lifelines to individuals and businesses
2.6 percent in the same period. amid the pandemic, and not further exacerbating
the country’s burgeoning debt. At the beginning
However, not all sides of China’s economy recovered of the year, China committed to reducing business
at the same time. While investment and exports expenses by over RMB 2.5 trillion (US$390 billion)
rebounded relatively quickly, the recovery of over the course of the year, including RMB 500
domestic consumption lagged. Private consumption billion (US$77 billion) in new tax and fee cuts.
– which is closely tied to disposable incomes along
with people’s willingness to go out to eat, travel, shop As the year rolled on, Chinese authorities continued
– experienced a drop of 4 percent in 2020, while to implement a myriad of different support policies
private investment was slow to recover and only for businesses – ranging from rent waivers and
presented a 1 percent growth in 2020. social security exemptions to streamlined customs
processes, among others.
In 2021, continued economic recovery is expected
lower unemployment rates, shore up consumer 2021 will certainly witness a gradual rollback
confidence and allow offline consumption to return of these measures, such as the reversal of social
to normal. Further, the tertiary industry’s added insurance exemption in Beijing. A similar fate awaits
value and the growth of fixed asset investment are China’s monetary policy as the government retreats
expected to continue their upwards trend. from the sharp expansion in credit introduced at
the beginning of the COVID-19 outbreak. However,
Over the next 11 months, China will continue to both monetary and fiscal policies will likely remain
rebalance its economy and push out long-term accommodative so long as the pandemic risk is
reforms. This will be underpinned by the theme of present.
‘continuous, stable, and sustainable’ growth set forth
at the Central Economic Work Conference (CEWC) – According to China’s central bank governor Yi Gang,
the main economic agenda-setting event for 2021. the People’s Bank of China (PBOC) will prioritize
a stable monetary policy in 2021, and any steps
Consistent with the CEWC and 14th Five Year to reduce stimulus measures would have gradual
Plan, policymakers will proactively endorse and impact on the economy.
implement structural reforms, which will consolidate
the supply-side reform measures (adopted since Meanwhile, the PBOC pledged to strengthen its
2015) while ushering in the newly-introduced financial support for technology innovation, private
‘demand-side reforms.’ companies, and small and micro-sized enterprises,
as outlined in its Key Tasks for 2021. One example
This, of course, will be guided by the ‘dual circulation of this, is the extension of the credit support plan for
strategy’ which refers to a parallel emphasis on small businesses, which allows principal interests
‘internal’ and ‘international’ circulation. Simply put, and repayments on inclusive loans to be postponed
this means: – a policy announced by Premier Li Keqiang on
December 21, 2020.
• Spurring China’s domestic demand (through
job creation, improving social security and an The challenge this year is for China to continue to
expanding middle class); and strike a balance between kickstarting economic
reforms and not stifling growth.
• Creating conditions to facilitate foreign
investment and boost export-oriented production. Market reforms and opening-up
Internal circulation is also designed to boost China’s Notwithstanding the slow start to the year, 2020
tech-self-sufficiency and food security – two of the remained a productive year for China by way of
government’s foremost priorities stipulated in the reform and opening-up.
14th Five-Year-Plan outline.
SOUTH CHINA BUSINESS JOURNAL 4
out in mega-regions, such as the Yangtze River Delta,
China staged an impressive recovery in 2020 – as well as economic policies that aim to stimulate
exhibiting a 2.3 percent GDP growth, despite the domestic economy through innovative measures
prolonged lockdowns and a nationwide economic lull ranging from subsidies for replacing old home
in Q1. appliances to slashed taxes on used cars to make
purchasing new items accessible to all consumers.
Foreign trade totaled RMB 32.16 trillion (US$4.96
trillion), an increase of 1.9 percent from the previous Fiscal and monetary policies
year. This was driven largely by exports of medical
supplies and masks, which drove the first uptick in In 2020, China walked a fine line between offering
April. Further, fixed asset investment increased by financial lifelines to individuals and businesses
2.6 percent in the same period. amid the pandemic, and not further exacerbating
the country’s burgeoning debt. At the beginning
However, not all sides of China’s economy recovered of the year, China committed to reducing business
at the same time. While investment and exports expenses by over RMB 2.5 trillion (US$390 billion)
rebounded relatively quickly, the recovery of over the course of the year, including RMB 500
domestic consumption lagged. Private consumption billion (US$77 billion) in new tax and fee cuts.
– which is closely tied to disposable incomes along
with people’s willingness to go out to eat, travel, shop As the year rolled on, Chinese authorities continued
– experienced a drop of 4 percent in 2020, while to implement a myriad of different support policies
private investment was slow to recover and only for businesses – ranging from rent waivers and
presented a 1 percent growth in 2020. social security exemptions to streamlined customs
processes, among others.
In 2021, continued economic recovery is expected
lower unemployment rates, shore up consumer 2021 will certainly witness a gradual rollback
confidence and allow offline consumption to return of these measures, such as the reversal of social
to normal. Further, the tertiary industry’s added insurance exemption in Beijing. A similar fate awaits
value and the growth of fixed asset investment are China’s monetary policy as the government retreats
expected to continue their upwards trend. from the sharp expansion in credit introduced at
the beginning of the COVID-19 outbreak. However,
Over the next 11 months, China will continue to both monetary and fiscal policies will likely remain
rebalance its economy and push out long-term accommodative so long as the pandemic risk is
reforms. This will be underpinned by the theme of present.
‘continuous, stable, and sustainable’ growth set forth
at the Central Economic Work Conference (CEWC) – According to China’s central bank governor Yi Gang,
the main economic agenda-setting event for 2021. the People’s Bank of China (PBOC) will prioritize
a stable monetary policy in 2021, and any steps
Consistent with the CEWC and 14th Five Year to reduce stimulus measures would have gradual
Plan, policymakers will proactively endorse and impact on the economy.
implement structural reforms, which will consolidate
the supply-side reform measures (adopted since Meanwhile, the PBOC pledged to strengthen its
2015) while ushering in the newly-introduced financial support for technology innovation, private
‘demand-side reforms.’ companies, and small and micro-sized enterprises,
as outlined in its Key Tasks for 2021. One example
This, of course, will be guided by the ‘dual circulation of this, is the extension of the credit support plan for
strategy’ which refers to a parallel emphasis on small businesses, which allows principal interests
‘internal’ and ‘international’ circulation. Simply put, and repayments on inclusive loans to be postponed
this means: – a policy announced by Premier Li Keqiang on
December 21, 2020.
• Spurring China’s domestic demand (through
job creation, improving social security and an The challenge this year is for China to continue to
expanding middle class); and strike a balance between kickstarting economic
reforms and not stifling growth.
• Creating conditions to facilitate foreign
investment and boost export-oriented production. Market reforms and opening-up
Internal circulation is also designed to boost China’s Notwithstanding the slow start to the year, 2020
tech-self-sufficiency and food security – two of the remained a productive year for China by way of
government’s foremost priorities stipulated in the reform and opening-up.
14th Five-Year-Plan outline.
SOUTH CHINA BUSINESS JOURNAL 4
