China 2021 Q1 Overview - Continued Growth in Economic Indicators

On the 16th of April 2021, the Chinese government published the quarterly economic data for the first quarter of 2021. When comparing the results to the first quarter of 2020 the results seem remarkable. However, these figures are distorted because of the low base figures for Q1 2020, due to the outbreak of COVID-19, the subsequent extension of the Spring Festival holiday and the economy coming to a standstill. Nevertheless, when comparing to the first quarter of 2019 and to the previous quarters, the economy shows continued growth after the downturn experienced in the first half of 2020. Below we highlight the most important takeaways of the economic data which has just been released.


Continued GDP growth despite slower growth on q-o-q basis

In the first quarter of 2021, China’s economy saw a year-on-year GDP growth rate of 18.3% compared to the first quarter of 2020. However, as the first quarter of 2020 was marked by an extended Spring Festival holiday and economic slowdown due to the outbreak of COVID-19, the comparison is distorted. When comparing the data to the first quarter of 2019, the GDP increased by 10.3%, with an average two-year growth of 5%. However, on a quarter-on-quarter basis, the growth of GDP has slowed in Q1. Over the period 2016-2019 the q-o-q- growth hoovered between 1-2%. In 2020 we saw a significant drop to -9.3% in Q1, before picking up to 10.1% (Q2), 3.1% (Q3), and 3.2% (Q4). In Q1 of 2021 the q-o-q growth amounted to only 0.6%, which could indicate GDP growth may slow down.  
 

Strong momentum for Imports and Exports

In the first quarter in 2021, the total aggregate value of imports and exports of goods increased by 29.2% year-on-year, compared to a drop of 6.5% in the same period in 2020. In particular, the total value of exports went up by 38.7% year-on-year and imports went up by 19.3% year-on-year basis.
 

Slight increase in unemployment during first quarter

After the surveyed unemployment rate in urban areas returned to pre-Covid levels in December 2020 (5.2%), it saw an increase over the first quarter of 2021. After an increase to 5.4% in January and 5.5% in February, the unemployment rate again decreased to 5.3% in March. As a comparison, in February 2020 the unemployment rate had risen to 6.2%, before decreasing to 5.2% at the end of 2020.
 

Purchasing Managers' Index (PMI) remains in expansionary territory despite dip early in the quarter

The composite PMI output index for large enterprises is a weighted summation of the manufacturing output index and non-manufacturing business activity index. If the PMI index is 50 this indicates no change, whereas a number over 50 indicates improvement and a number below 50 suggests a decline.
 
After the Composite PMI for large enterprises reached 55.1 in December, it experienced a dip early in Q1, dropping to 52.8 in January and 51.6 in February, although this does signal continued expansion. The indicator showed significant improvement in March, reaching 55.3. Both the manufacturing and non-manufacturing PMI displayed a drop and subsequent increase.
 
At the time of writing, the PMI data for SMEs is incomplete. However, the general manufacturing PMI has dropped from a 10-year high of 54.9 in November 2020 to 50.6 in March, the lowest level since April 2020.
 

Continued growth in Retail Sales, still mainly driven by online retail sales

In the first quarter of 2021, the total retail sales of consumer goods increased by 33.9% y-o-y. However, this is compared to Q1 2020, which experienced a decrease of 19.0% y-o-y compared to the same period in 2019. On a quarterly basis the total retail sales of consumer goods increased by 1.86%, with an average two-year growth of 4.2%.
 
In line with past quarter, the main driver of this growth was online retail sales. In Q1, online retail sales increased by 29.9% y-o-y, with an average two-year growth of 13.5 percent.
 

Value added of industrial enterprises shows continued growth

The value added of industrial enterprises, also known as the industrial growth rate, expanded by 24.5% year-on-year in the first quarter of 2021, or by 2% q-o-q, with an average two-year growth of 6.8%.
In the first two months, the industrial growth rate achieved 35.1% growth y-o-y, and an increase of 16.9% compared to the first two months of 2019. Whereas in March, the industrial growth rate increased by 14.1% y-o-y.