MANILA, PHILIPPINES (22 September 2021) — The People’s Republic of China (PRC) is expected to see 8.1% economic growth in 2021 as solid exports as well as increased fiscal support in the second half of the year will offset a more protracted recovery in household consumption, according to a new report by the Asian Development Bank.
The PRC’s economy is projected to expand 5.5% in 2022, according to Asian Development Outlook 2021 Update, released by the bank today. The forecasts for this year and next were unchanged from projections made by ADB in April, even as concerns about the coronavirus disease (COVID-19) pandemic continued to weigh on economies globally.
“The PRC’s economy recovered further in the first half of 2021, driven by strong exports and improving consumption,” said ADB Country Director for the PRC Yolanda Fernandez Lommen. “For this year and the next, consumption will continue to be the main growth driver, followed by investment and net exports.”
Consumer price inflation in 2021 is forecast to stay well below its 2020 rate as pork price deflation keeps food prices in check. Nonfood inflation is expected to remain moderate for the rest of 2021. As household demand will recover only gradually, companies will find it difficult to increase prices for services. The inflation forecast for 2021 is therefore lowered to 1.3%, but the forecast for 2022 remains unchanged at 2.3% to accommodate revived food price inflation.
With a solid recovery in household consumption and retail sales, consumption regained its position as the main contributor to growth, adding 7.8 percentage points in the first half of 2021.
Net exports are forecast to contribute slightly more to growth in 2021 than expected earlier, despite a projected decline in the trade surplus, reflecting higher commodity prices. The net export contribution to growth should retreat in 2022 as the current account surplus moderates.
Investment contributed 2.4 percentage points to growth in the first half of 2021, or 0.9 percentage points more than a year earlier. In the first 7 months, driven by investment in manufacturing and real estate, fixed asset investment came back from a 1.6% contraction in nominal terms a year earlier to increase by 10.3%.
Though labor market statistics do not measure underemployment, available data indicate that the labor market has improved in line with economic recovery. By the end of June 2021, rural labor migrants in urban areas had nearly returned to their 2019 numbers. The surveyed urban unemployment rate was 5.1% at the end of July 2021, or 0.2 points lower than at the same point in 2019.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.