The most important tasks for the Chinese economy in 2021
Chen Jiahe
Getty photo

Getty photo

Editor's note: Chen Jiahe is the chief investment officer at Novem Arcae Technologies. The article reflects the author's opinions, and not necessarily the views of CGTN.

2020 has been a tough year for both the Chinese economy and the world economy., with COVID-19 hitting many global industries and international trade. Entertainment and service industries such as travel, restaurants and film have been severely damaged this year. Meanwhile, with many lockdowns and strict orders in place, the productivity of many important industrial centers have decreased and global trade between economic centers have weakened.

So, what is in store for us in 2021? The Chinese economy is now the silver lining for the world, it has largely defeated the COVID-19 pandemic and is exporting an extraordinary amount of goods to other economies. The stabilization and growth of China's economy in the coming year is vital to the world, as well as the global battle against the pandemic.

The most important task for the Chinese economy in 2021 is the continuous containment of COVID-19. Although China has maintained a good record in 2020 after the initial breakout, random breakouts scattered across the country have continued throughout the year. Although most of these breakouts contain only a few infected cases, the contagious capability of this new virus is still dangerous. If enough attention is not given to containing the virus, a breakout on a large scale is still possible.

China has to work hard to stimulate its consumption industry. Among the economic sectors that have been affected by the pandemic, the consumption sector has been hit the hardest. This is because many consumption sectors, such as film and tourism, require a dense gathering of people. In 2020, the overall consumption of the Chinese economy is slightly lower than one year ago, while the overall GDP still grew by a few percentage points from 2019. The stimulation of the consumption industry in 2021 will be a priority for China's economy.

Price control for the consumption sector is also a task. The CPI growth rate of China reached -0.5 percent this November, which is the lowest pm record since 2009. A continuous decrease of the consumer price can cause a deflationary status for the economy, which is a negative factor that might drag down economic growth rate as consumers will intend to save more than they consume in a deflationary environment. 

Meanwhile, if too much liquidity is injected into the economy and a high-level inflation is brought back, it can also harm the consumption sector. The containment of the inflationary level within a moderate range is a task that requires sophisticated operation from the central bank, i.e., the People's Bank of China.

An aerial photo of an ocean going Ro / Ro ship loading export cars at a dock in Lianyungang, Jiangsu Province, China, December 14, 2020. /Getty photo

An aerial photo of an ocean going Ro / Ro ship loading export cars at a dock in Lianyungang, Jiangsu Province, China, December 14, 2020. /Getty photo

The development and use of technology are also long-term tasks for the Chinese economy in the coming years or even decades. On the one hand, the blockade from the United States in the past few years in the field of high-end technologies has taught China a lesson that if the country does not have a say with its vital technologies, it can be hurt in the international market. The development of domestic technologies is therefore a vital task for the long-term development of the Chinese economy.

On the other hand, the application of technology in China's consumption market has caused some challenges in 2020 and a lot of relevant social debates regarding these matters have been brought up. Some large companies have been using their dominant market positions in the industries such as online shopping and online lending to reap a large profit from their customers. Meanwhile, some online lending companies and P2P (peer to peer) companies have defaulted. 

At the end of the year, some long-term renting companies, who attract their customers mainly through internet, have become insolvent and the lives of tenants have been affected. With the latest memo from the central government's economic meeting, a lot of regulatory actions will be taken in 2021 regarding these areas. The order of the market is intended to be restored and the benefit of customers will be protected.

Another important task for the Chinese economy in 2021 will be stabilizing the property market. The property price in China's urban areas, especially in some metropolises such as Shenzhen and Shanghai is now very expensive. If property prices continue its rising trend in 2021, a lot of social pressure will be added and the creativity of China's economy will be reduced as the property sector is the one that returns the highest for investment and the return of technological investment projects will attract little money. 

However, a sharp reduction of property prices will cause damage to the financial sector and might trigger an economic slowdown, which is also unwanted in the post-pandemic era. The containment of the property market and property prices will be a complicate task.

Beside these areas, there are also many other sectors that the Chinese economy will have to deal with in 2021, such as the continuous opening of domestic markets, the control of the carbon emissions while balancing economic development, the improvement of the quality for the agriculture, etc. 2021 will be an important and challenging year and let us hope that the global pandemic will end next year for good.

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