China’s economy has benefited from throughgoing pandemic response measures that allowed the government to reopen the economy last Spring. China’s first quarter GDP surged by 18.3 percent in 2021, the highest quarterly growth on record. However, the jaw-dropping increase was largely due to the contrast with the economic shut-down in the first three months of 2020. On a quarter-by-quarter basis, China’s GDP grew by 0.6 percent, a less dramatic number that nonetheless confirms that recovery is continuing. Growth rates will begin to normalize to pre-crisis levels over the next quarters.
After a year marked by crisis-management during the Covid-19 pandemic, the focus in 2021 will be on smoothing out the economic aftershocks. Policy makers are already signaling moderate tightening of fiscal and monetary policy. The better-than-expected recovery has given China’s government the confidence to begin cautiously rolling back stimulus measures.
Although China’s government did not abandon the practice of setting a GDP growth target in 2021, it is seeking very conservative growth of “over 6 percent.” Given historically low GDP growth in 2020, it is really a non-target that underlines the government’s desire to return the economy to pre-pandemic normality.