China eked out 2.3% economic growth in 2020, likely becoming the only major economy to expand as shops and factories reopened relatively early from a shutdown to fight the coronavirus while the United States, Japan and Europe struggled with disease flare-ups.
Growth in the three months ending in December rose to 6.5% over a year earlier, up from the previous quarter’s 4.9% and stronger than many forecasters expected, official data showed Monday.
In early 2020, activity contracted by 6.8% in the first quarter as the ruling Communist Party took the then-unprecedented step of shutting down most of its economy to fight the virus. The following quarter, China became the first major country to grow again with a 3.2% expansion after the party declared victory over the virus in March and allowed factories, shops and offices to reopen.
Exports were boosted by demand for Chinese-made masks and other medical goods.
The growing momentum “reflected improving private consumption expenditure as well as buoyant net exports,” said Rajiv Biswas of IHS Markit in a report. He said China is likely to be the only major economy to grow in 2020 while developed countries and most major emerging markets were in recession.
The economy “recovered steadily” and “living standards were ensured forcefully,” the National Bureau of Statistics said in a statement. It said the ruling party’s development goals were “accomplished better than expectation” but gave no details.
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2020 was China’s weakest growth in decades and below 1990's 3.9% following the crackdown on the Tiananmen Square pro-democracy movement, which led to China's international isolation.
Despite growth for the year, "it is too early to conclude that this is a full recovery,” Iris Pang of ING said in a report. “External demand has not yet fully recovered. This is a big hurdle.”
Exporters and high-tech manufacturers face uncertainty about how President-elect Joseph Biden will handle conflicts with Beijing over trade, technology and security. His predecessor, Donald Trump, hurt exporters by hiking tariffs on Chinese goods and manufacturers including telecom equipment giant Huawei and imposing curbs on access to U.S. components and technology.
“We expect the newly elected U.S. government will continue most of the current policies on China, at least for the first quarter,” Pang said.
The International Monetary Fund and private sector forecasters expect economic growth to rise further this year to above 8%.
Exports rose 3.6% last year despite the tariff war with Washington. Exporters took market share from foreign competitors that still faced anti-virus restrictions.
Retail spending contracted by 3.9% over 2019 but gained 4.6% in December over a year earlier as demand revived. Consumer spending recovered to above the previous year’s levels in the quarter ending in September.
Online sales of consumer goods rose 14.8% as millions of families who were ordered to stay home shifted to buying groceries and clothing online.
Factory output rose 2.8% over 2019. Activity accelerated toward the end of the year. Production rose 7.3 in December.
China has re-imposed travel controls in some areas after a spate of cases this month but most of the country is unaffected.
Authorities have called on the public to avoid travel and large gatherings during next month's Lunar New Year holiday, when millions of people usually visit their hometowns. That might dent spending on travel, gifts and restaurants.
Other activity might increase, however, if farms, factories and traders keep operating instead of closing for up to two weeks for the holiday, Chaoping Zhu of JP Morgan Asset Management said in a report.
“Unusually high growth rates in this quarter are likely to be seen,” said Zhu.
Europe's push into electric cars is gathering speed — despite the pandemic.
Automaker Volkswagen tripled sales of battery-only cars in 2020 as its new electric compact ID.3 came on the market ahead of tough new European Union limits on auto emissions. And Germany, long a laggard in adopting electric vehicles, saw more people buy electrics in December than opted for previously dominant diesel vehicles.
Those are early signs of what will likely be an upcoming year of increasing market share for electric cars as EU regulations drive their adoption, despite the recession caused by the coronavirus pandemic that has caused the overall car market to shrink.
Volkswagen said Tuesday its namesake brand sold 134,000 battery-powered cars last year, up from 45,000 in 2019.
Including hybrids, which combine an internal combustion engine and an electric motor, sales of electrified cars reached 212,000, up from 82,000 in 2019.
Volkswagen's announcement comes as the auto industry association in Germany reports that one in four cars sold in the country in December had an electric motor, uptake that was supported by incentives as part of the government stimulus package during the COVID-19 recession.
Battery and hybrid cars took 26.6% of sales that month, running ahead of diesel cars, which had 26.2%. That is also a token of diesel's steep decline after Volkswagen's 2015 scandal involving diesel cars rigged to cheat on emissions tests.
Electric cars have so far been a small but rapidly growing slice of the European market. According to the European Automobile Manufacturers Association, in the July-September quarter of 2020 9.9% of cars sold were chargeable vehicles, up from 3.0% a year earlier. The association publishes full-year statistics on Feb. 4.
Automakers in the EU must sell more zero-emission cars in order to meet tougher fleet average limits on emissions of carbon dioxide, the primary greenhouse gas blamed for climate change. Those limits came fully into effect on Jan. 1. Failure to achieve a fleet average of less than 95 grams of carbon dioxide per kilometer driven can mean heavy fines.
Sales have been driven by government incentives, and by an increasing number of new models that — like the ID.3 — were designed purely as electric cars, rather than being converted from internal combustion models. Electric-only design can mean more interior space as a selling point. The compact ID.3 isn't coming to the U.S. market, where Volkswagen will offer the electric ID.4 sport-utility vehicle made on the same mechanical base.
Demand has been held back by lack of places to charge electric cars, including for people who live in apartment buildings and can't install a charging box at home. Germany's auto association, the VDA, said there's only one publicly available charging station for every 17 electric cars.
California-based Tesla has been a major factor in the electric upswing with its Model 3 and its proprietary network of fast-charging stations.
The government in China, the world's largest auto market, is also pressing carmakers to lower emissions.
The uptake of electric vehicles has been slower in the United States, where regulatory pressure has been weaker and where gasoline costs as little as $2 per gallon, depending on the region. That compares to 1.30 euros per liter of gas, or $6 per gallon in Germany, much of which is taxes.
The U.S. said it will ban all shipments of palm oil from one of the world’s biggest producers after finding indicators of forced labor and other abuses on plantations that feed into the supply chains of some of America’s most famous food and cosmetic companies.
The order against Malaysian-owned Sime Darby Plantation Berhad and its local subsidiaries, joint ventures and affiliates followed an intensive months-long investigation by the U.S. Customs and Border Protection’s Office of Trade, said Ana Hinojosa, one of the agency’s executive directors, reports AP.
Hinojosa said the investigation “reasonably indicates” abuses against workers that included physical and sexual violence, restriction of movement, intimidation and threats, debt bondage, withholding of wages and excessive overtime. Some of the problems appeared to be systemic, occurring on numerous plantations, which stretch across wide swaths of the country, she said.
“Importers should know that there are reputational, financial and legal risks associated with importing goods made by forced labor into the United States,” Hinojosa said in a telephone press briefing.
The order was announced just three months after the federal government slapped the same ban on another Malaysian palm oil giant, FGV Holdings Berhad -- the first palm oil company ever targeted by Customs over concerns about forced labor. The U.S. imported $410 million of crude palm oil from Malaysia in fiscal year 2020, representing a third of the total value shipped in.
The bans, triggered by petitions filed by non-profit groups and a law firm, came in the wake of an in-depth investigation by The Associated Press into labor abuses on plantations in Malaysia and neighboring Indonesia, which together produce about 85% of the $65 billion supply of the world’s most consumed vegetable oil. Palm oil can be found in roughly half the products on supermarket shelves and in most cosmetic brands. It’s in paints, plywood, pesticides, animal feed, biofuels and even hand sanitizer.
The AP interviewed more than 130 current and former workers from two dozen palm oil companies, including Sime Darby, for its investigation. Reporters found everything from rape and child labor to trafficking and outright slavery on plantations in both countries.
Earlier this month, 25 Democratic lawmakers from the U.S. House Ways and Means Committee cited AP’s investigation in a letter calling for the government to come down harder on the palm oil industry in Malaysia and Indonesia, asking Customs and Border Protection if it had considered a blanket ban on imports from those countries.
“In our view, these odious labor practices and their pervasive impact across supply chains highlight the need for an aggressive and effective enforcement strategy,” the letter said.
Sime Darby, which did not immediately comment, has palm oil plantations covering nearly 1.5 million acres, making it one of Malaysia’s largest producers. It supplies to some of the biggest names in the business, from Cargill to Nestle, Unilever and L’Óreal, according to the companies’ most recently published supplier and palm oil mill lists.
Hinojosa said the agency’s decision to issue the ban should send an “unambiguous” message to the trade community.
“Consumers have a right to know where the palm oil is coming from and the conditions under which that palm oil is produced and what products that particular palm oil is going into,” she said.
Meanwhile, Duncan Jepson of the anti-trafficking group Liberty Shared, which submitted the petition leading to the Sime Darby ban, filed two additional complaints Wednesday — one to the UK’s Home Office, questioning the company’s disclosure about its protection of human rights under the country’s Modern Slavery Act, and the other to the Malaysian stock exchange, regarding the company’s stated commitments to sustainability. Both complaints questioned the accuracy of Sime Darby’s disclosures in light of the CPB’s findings.
Jepson said the U.S. ban also should be a red flag for Asian and Western financial institutions that have helped support the industry, saying ties to forced labor could have serious consequences for banks and lenders.
The U.S. government’s announcement about Sime Darby marked the 14th time this year Customs has issued an order to detain shipments from an array of sectors following similar investigations into forced labor. They include seafood and cotton, along with human hair pieces believed to have been made by persecuted Uighur Muslims in Chinese labor camps.
Under Wednesday’s order, palm oil products or derivatives traceable to Sime Darby will be detained at U.S. ports. Shipments can be exported if the company is unable to prove that the goods were not produced with forced labor.
The Chinese economy is expected to usher in 2021 with stronger recovery after surviving a triple whammy of COVID-19, economic slowdown and trade protectionism in an eventful 2020.
Standing at the forefront of epidemic control and resumption of work and production throughout this year, the world's second largest economy has rebounded from the early lows to become the only major economy expected to achieve positive growth.
In the year ahead, a brand-new prospect will open up as the country is ready to implement its 14th five-year plan (2021-2025) and Long-Range Objectives Through the Year 2035.
The following aspects might offer a glimpse into the evolving Chinese economy in the ever-changing times.
STRONG PERFORMANCE EXPECTED
As the country is on high alert for a new wave of COVID-19 this winter, starting to inoculate key groups including workers in the cold chain industry, customs, healthcare, markets and public transportation with COVID-19 vaccines, a massive lockdown is a highly unlikely event.
As a result, an attractive economic growth data set will be in the bag for the first quarter of next year, as the pandemic blow inflicted a 6.8-percent contraction on the first quarter of this year.
Based on existing forecasts by international institutions, optimism will prevail throughout the year, with the International Monetary Fund (IMF) projecting an 8.2 percent growth for the Chinese economy, and the World Bank, 7.9 percent.
Zhang Liqun, a researcher with the Development Research Center of the State Council, predicted that tremendous domestic market potential will drive growth of above 8 percent next year.
Chinese authorities said they will manage to ensure that the economy continues to operate within a reasonable range, just as the recently concluded Central Economic Work Conference required.
A reasonable range means sufficient jobs and balanced supply-demand relationship, Zhang said, stressing efforts to expand domestic demand and sustain the current macroeconomic policy's orientation and intensity.
STIMULUS POLICY REMAINS
While China has placed greater emphasis on the consistency and sustainability of its macroeconomic policy, targeted stimuli will not exit easily so as to boost consumption demand, enliven market entities, consolidate economic recovery and cope with new challenges.
"Endogenous driving forces such as personal consumption and manufacturing investment will be the major growth engines for China's economy next year," according to Xing Ziqiang, a chief economist with Morgan Stanley China. Xing projected that personal consumption growth will accelerate from minus 1 percent in 2020 to 12 percent next year, contributing 6.7 percentage points to GDP growth.
On further boosting domestic demand, Gao Ruidong, an analyst with Everbright Securities, suggested that fiscal policy should play a more active role in optimizing income distribution, increasing investment in technological upgrades in the manufacturing industry, and strengthening demand side management.
Macroeconomic policies need to be flexible, and appropriate adjustments should be made in line with economic development, said Dong Ximiao, an analyst with Merchants Union Consumer Finance Company. Some provisional measures might phase out if the economy recovers rapidly next year, he said.
Also, liquidity should be more precisely injected into key fields and weak links, Dong added, calling for more support for technological innovation, small enterprises and green development.
Next year will continue to see the country's commitment to innovation, a major growth driver which was underlined at the recent Central Economic Work Conference.
Vowing to strengthen its national strategic technologies, China will make efforts to step up the formulation and implementation of a 10-year action plan to boost basic research, and plan a number of basic discipline research centers, according to the meeting.
While giving full play to the state's role in organizing major science and technology innovations, China will also maximize the principal role of enterprises in such innovations, supporting innovation activities of small and medium-sized firms.
Commenting on the country's decision to encourage enterprise participation in innovation, Yuan Min, vice president of Tencent, said the Chinese technology giant was strongly motivated and will step up efforts in basic research, strengthening its own innovation capabilities and initiating more innovation programs.
CONTRIBUTION TO WORLD ECONOMY
In 2021, China is estimated to contribute more than one-third to global economic growth, according to a report by Organization for Economic Co-operation and Development.
Apart from its steady economic recovery, China's contribution comes from its devotion to opening up at a higher level and creating a better business environment.
In November, China signed the Regional Comprehensive Economic Partnership agreement, which launched the world's biggest free trade bloc. China also implemented the foreign investment law this year, and unveiled a much shorter negative list for foreign investors.
Despite uncertain factors in the external environment, China's foreign trade of goods rose 1.8 percent year on year in the first 11 months, while foreign direct investment into the Chinese mainland, in actual use, expanded 6.3 percent year on year.
Foreign companies have remained confident in the Chinese market. A survey released by China's Ministry of Commerce in July showed that some 99.1 percent of the respondent foreign companies said their operations in the world's second-largest economy will continue.
Tao Lin, Tesla's Global Vice President, said this year's economic work conference has convinced the electric car maker that investing in China is a correct decision, adding that Tesla is fortunate to be moving ahead with China's steady economic recovery.
In the future, Tesla will continue to expand investment and be more integrated into the Chinese market, and contribute to building the new development paradigm, Tao said.
New York City has seen almost one in seven nationally recognized chain-store branches close their doors in 2020 as the COVID-19 pandemic ravaged the country and sent consumers scurrying for cover, according to a latest industry report.
A record high 1,057 chain stores, including 70 Duane Reades, 49 Starbucks and 22 Papyruses, have ended their businesses over the past 12 months, said the Center for an Urban Future's annual "State of the Chains" report released this week.
The 13.3 percent decline shatters all previous records reported by the nonprofit agency since it began tracking the data 13 years ago. Last year, just 3.7 percent of all chain outlets closed, up from 0.3 percent in 2018.
"If the national chains are scaling back like this, I have to imagine it's twice as bad for mom-and-pop stores, who don't have the same ability to weather a storm or get access to financing," the center's executive director, Jonathan Bowles, was quoted by the New York Post as saying.
Among the five boroughs of the city, Manhattan absorbed the deepest cuts with 520 chain closures, almost half of the city total, due to the borough's dependence on office workers, tourists and wealthy residents who have decamped to homes outside the city, said the report.
Among the hardest-hit sectors were sandwich shops that cater to office workers, many of whom since March have been able to work from home, according to the report.
Meanwhile, some 40 chains actually added locations, led by Popeyes fried-chicken fast food, which added 11 new eateries.
Bowles believes there's a chance that much of the food-sector decline is only temporary, assuming a large number of workers return to their offices when the pandemic eases.