What is China’s economic outlook in 2021?
In China, the post-Covid-19 recovery is well underway. While the 2020 rebound was mostly about policy-driven areas such as real estate and infrastructure, 2021 will focus on policy normalization, with household consumption and business investment as the growth drivers.
The external environment will remain supportive, since many of China’s trading partners have not fully restored their production capacities and their policies are in full easing mode. We expect the Chinese economy to grow by +8.2% in 2021 followed by +5.4% in 2022.
What can be expected on the policy front?
Policymakers’ focus is shifting away from short-term stimulus to managing financial vulnerabilities. We expect policy normalization to be done in a flexible and gradual manner, so as not to derail the economic recovery. Fiscal support in 2021 will be lower than in 2020, but remain relatively generous. The monetary policy already started to tighten in Q4 2020, and should continue in 2021 through liquidity and regulation.
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What is in store for Asia-Pacific?
With the pandemic overall under better control than in other regions, we expect Asia-Pacific’s GDP to expand by +6.6% in 2021 followed by +4.7% in 2022. But these solid rates of growth mask uneven recovery speeds, given different states of the pandemic, vaccination programs, policy reactions and external exposures.
Economies such as Taiwan, Vietnam, South Korea and Singapore in particular will benefit from the early recovery of China, the electronics value chain and the US super stimulus. In particular, we expect the US super stimulus to demand an additional USD138bn of exports from Asia-Pacific over the next two years, largely from the computers & telecom, household equipment, textiles, and machinery & equipment sectors.
Overall, upward revisions for 2021 in Asia-Pacific are mostly led by Singapore, Vietnam and Taiwan, while Malaysia, Thailand and the Philippines were revised on the downside.