China’s economy expanded faster than expected in Q4 2020

Vrasidas Neofytou
Head of Investment Research

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China’s equity indices advance near all-time highs after the economy was reported to have grown 6.5% in the fourth quarter of 2020 compared to a year ago, beating expectations of 6.1%.

The Chinese economy was surprisingly resilient during 2020, expanding by 2.3% while the rest of the world has been struggling by an ongoing financial recession caused by a renewed pandemic outbreak.

The higher-than-expected GDP growth has been primarily driven by China’s rapid containment of the Covid-19 virus, the massive fiscal and monetary stimulus plans, the resilient supply chains, the growth in retail consumption, and stronger demand for Chinese exports.

China has had a remarkable V-shaped recovery last year, returning to growth after a 7% contraction in the first quarter propelled from the lockdowns in the economic activity to contain the virus.

Furthermore, the Chinese Yuan appreciated to 6.5 against the dollar, its highest level since 2018, supported mainly by the trade surplus and the rising exports thanks to surging demand for face masks and other goods linked to the Covid-19 crisis.

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