China on Monday reported a gross domestic product (GDP) increase of 6.5 percent in the fourth quarter of 2020, bringing the country's full-year expansion to 2.3 percent.

Despite the grave and complex environment posed by the COVID-19 pandemic, China managed to bring its economic growth back to a pre-pandemic rate. Its full-year GDP exceeded 100 trillion yuan ($15.45 trillion) for the first time, China's National Bureau of Statistics said. 

China's fourth-quarter GDP beat many institutions' expectations, including Reuters' forecast of 6.1 percent and Natixis' estimation of 6.3 percent. Only Barclays had estimated a growth of 6.5 percent. 

The annual growth of 2.3 percent indicates that China led major economies in annual positive growth in 2020, while many others continue to grapple with the pandemic.

Seeing a more robust recovery in China, the World Bank (WB) last year estimated that the country would increase its share of the world economy to 14.5 percent in 2020, with global output contracting 4.3 percent, compared with the U.S.' 22 percent share for the same period.

Based on projections from the International Monetary Fund, China will overtake the U.S. as the largest economy by 2028, two years earlier than predicted, said Japanese financial holding company Nomura. Pointing to a slow and challenging recovery, the WB forecast U.S. GDP to expand 3.5 percent in 2021 after an estimated 3.6 percent contraction in 2020. 

"A 2.3 percent GDP growth for 2020 certainly augurs the beginning of the recovery for the Chinese economy. Notably, this growth rate hits the high end of the 2.1-2.3 percent range discussed by most economists. Moving forward, these numbers confirm the trend that the days of eight percent GDP growth for China are closer than expected, perhaps as soon as 2021," said Edgar Perez, an independent consultant and former vice president at Citigroup.

The quickened economic recovery in the last quarter, accelerating from the third quarter's 4.9 percent pace, was driven by stronger demand both domestically and abroad.

China's total retail sales of consumer goods in 2020 reached about 40 trillion yuan ($6.16 trillion). Although the annual figure went down by 3.9 percent year on year, the fourth quarter saw a stronger recovery of 4.6 percent from 0.9 percent in the previous quarter, according to the National Bureau of Statistics of China (NBS). 

China's success in controlling the pandemic also helped it expand shares in global trade. The total value of imports and exports in 2020 increased by 1.9 percent, with exports booming by 4.0 percent. In year terms, "the exports of mechanical and electrical products grew by 6.0 percent, accounting for 59.4 percent of the total value of exports," said the NBS. 

Momentum from high-tech investment

Investment in high-tech grew by 10.6 percent in 2020. Inside high-tech services, the investment in e-commerce services and information services grew by 20.2 percent and 15.2 percent respectively.

"These impressive growth rates point to strong high-tech momentum for China in the first quarter of 2021 and beyond," Perez told CGTN.

"These trends are not going unnoticed by domestic and international investors; there is already strong demand for Chinese companies in these sectors to go public, reinforcing the 'virtuous cycle' that further cements technology's role as the driver of future growth," Perez said. However, "the real challenges will be to sustain the momentum throughout the decade."

Unbalanced growth cautioned

While affirming China's strong economic recovery, "I still want to focus on its unbalanced nature which justifies the continuation of demand reform," said Alicia Garcia Herrero, chief economist for the Asia Pacific at Natixis, in an email to CGTN.

She illustrated slower growth of retail sales in December and the growth mainly on online sales, which in her opinion, "is worrisome in terms of job creation and keeping disposable income growing."

"Private consumption is still the weakest link," Yue Su, principal economist at The Economist Intelligence Unit, said, echoing Herrero. "Significant improvement in consumption will be difficult until we see sustained expansion of employment."  

"I think China needs to rethink its fiscal stimulus towards supporting household income," Herrero said, pointing out that "household demand is not really back ... the growth is coming from the real estate (development) sector which will create additional excess capacity unless household income is pushed up."

Despite challenges, Su is confident that consumption will help maintain the current recovery momentum, citing current stimulus policies from the State Council, such as promoting rural car sales. 

(Graphics by Jia Jieqiong and Sa Ren)