The Chinese economy is on track to grow by 8.5% in 2021, up 0.6 percentage point from a previous projection, the World Bank Group said in its latest Global Economic Prospects. China’s ability to contain the pandemic pretty quickly, its significant policy support, as well as the recent pickup in global trade, help support China’s strong recovery, World Bank Prospects Group Director Ayhan Kose told reporters. According to the semi-annual report, the global economy is expected to expand 5.6% in 2021, up from the 4.1% it forecast in January, marking the strongest recovery from a recession in 80 years due to U.S. stimulus spending and faster growth in China but held back by “highly unequal” access to Covid-19 vaccines. The U.S. growth forecast was bumped up by 3.3 percentage points from January to 6.8% in the latest report, the fastest pace since 1984, due to economic support that the World Bank described as “unprecedented in peacetime.” World Bank Economist Ayhan Kose noted that most economies will not return to pre-pandemic levels until 2023 and beyond. If vaccine distribution to developing countries can be accelerated, Kose said that 2022 global GDP growth, currently forecast at 4.3%, could increase substantially to around 5%.
Unlike the strong recovery seen in the first few months, as reflected in the key economic data, the growth momentum is expected to moderate from July. For the full year, the GDP growth rate may come in at 8.5%, up significantly from the 2.3% seen last year, global ratings agency Moody’s Investors Service said in its revised forecast. Monetary policy focus in China is aimed at achieving balanced liquidity conditions, which will contribute to slower overall bank loan growth. Shadow banking assets will fall further this year as regulatory scrutiny tightens, it said. The investment-driven economic recovery, seen since last year, led to a sharp increase in economic leverage last year, and the overall leverage level rose by nearly 10 percentage points, according to the ratings agency. Though the government is paying more attention to risk control, fixed-asset investment is likely to grow at a slower rate in the second half, said Mao Zhenhua, Founder and Chief Economist of China Chengxin International Credit Rating Co, a company in which Moody’s is a shareholder.
China’s May factory gate prices rose at their fastest annual pace in over 12 years due to surging commodity prices, highlighting global inflation pressures. The producer price index increased 9.0%, accelerating from the 6.8% growth in April, Dong Lijuan, a senior official with the National Bureau of Statistics (NBS), said. The PPI rise in May was driven by significant price increases in crude oil, iron ore and non-ferrous metals, the NBS said. The PPI surge has yet to substantially feed through to consumer inflation. Consumer prices rose 1.3% in May, the biggest year-on-year increase in eight months, but remained well below the government’s official target of around 3%. The average CPI in the first five months of the year went up 0.4% from the same period last year, according to the NBS.
