From Recovery to Rebalancing : China’s Economy in 2021
Following a collapse in the first quarter of 2020, economic activity in China has normalized faster than expected, aided by an effective pandemic-control strategy, strong policy support, and resilient exports. While swift, the recovery has been une...
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| Format: | Report |
| Language: | English |
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Washington, DC: World Bank
2021
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| Online Access: | http://documents.worldbank.org/curated/en/297421610599411896/From-Recovery-to-Rebalancing-China-s-Economy-in-2021 http://hdl.handle.net/10986/35014 |
| Summary: | Following a collapse in the first
quarter of 2020, economic activity in China has normalized
faster than expected, aided by an effective pandemic-control
strategy, strong policy support, and resilient exports.
While swift, the recovery has been uneven, with domestic
demand recovering more slowly than production and
consumption more slowly than investment. Real GDP growth is
projected to slow to 2 percent this year before accelerating
to 7.9 percent in 2021, as consumer spending and business
investment continue to catch up, along with improving
corporate profits, labor market conditions, and incomes. The
growth outlook is predicated on the assumption that
well-targeted containment efforts supported by the gradual
rollout of effective COVID-19 vaccines starting in early
2021 will continue to keep new infection rates low and
prevent the resurgence of large-scale outbreaks. Economic
rebalancing toward services, innovation and consumption
driven growth has important spatial implications. This issue
is at the heart of the exploratory analysis of the focus
chapter in this report. While regional disparities in
output, labor productivity, and income have narrowed since
the mid-2000s, convergence was driven by a surge in
investment in lagging regions. This has led to growing
financial imbalances, mounting debt, and diminishing returns
that constrained further investment-driven catch-up growth.
Moreover, as China seeks to rebalance its economy from
investment to a more innovation- and services-driven growth
model, it will need to embrace the growth potential of its
most developed and innovative metropolitan areas and city
clusters, shifting the growth pole back to the coastal
regions. Against this backdrop, policies to foster market
integration and reduce spatial frictions in factor markets
would enable a more efficient spatial allocation of labor
and capital, harnessing the benefits of agglomeration and
urbanization. Such a shift will inevitably create tensions
with other policy objectives, notably the aim to reduce
inequality. Therefore, it will need to be accompanied by
fiscal policies to ensure a more equitable delivery of
public services and investment in human capital to mitigate
the very real consequences of resultant spatial disparities
on people’s lives and opportunities. |
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