China's soaring economic activity masks uneven growth recovery

[SHANGHAI] China's economic activity surged in the first two months of the year, though the figures mask an uneven recovery a year after the world's first coronavirus lockdown.

The official data released Monday show eye-popping growth rates of more than 30 per cent for key indicators, largely due to distortions when compared to last year's shutdown. However, the underlying momentum shows a rebound that's on a two-speed track, with strong industrial output and export demand and a lagging consumer recovery.

The weaker-than-expected investment growth and rise in unemployment points to an uneven recovery. While consumer spending has picked up, the rebound in retail sales hasn't been as strong as industrial production. Average growth in retail sales in the first two months of the year was 3.2 per cent higher than the same period in 2019, compared with 8.1 per cent for industrial output, according to the National Bureau of Statistics.

"We must be aware that the Covid-19 pandemic is still rampaging globally and the world economy is facing severe challenges," Liu Aihua, a spokeswoman for bureau, said in a statement. "Domestically, the unbalanced recovery is still notable and the foundation for the economic recovery is not solid yet."

China is still the only major economy to have powered out of the pandemic after an early control over the virus and then surging global demand for medical goods and work-from-home devices. The economy grew 2.3 per cent in 2020 and is forecast by economists to expand 8.4 per cent this year.

The government is targeting more modest growth of "above 6 per cent" in 2021, allowing officials to focus on managing financial risks in the economy, like bringing down debt and curbing asset bubbles. Beijing has signalled it wants to scale back its pandemic stimulus, with analysts predicting a gradual reduction in monetary and fiscal support.

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