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An Assessment of China’s Economic Growth in the First Quarter



Authors: Chan Kung and He Jun

On April 16, China’s National Bureau of Statistics has released the economic data for the first quarter of 2021. Preliminary estimates show that China’s GDP in the first quarter was RMB 24.931 trillion, an increase of 18.3% year-on-year and 0.6% quarter-on-quarter at comparable prices. The first-quarter GDP was also 10.3% higher than the GDP in the first quarter of 2019, with a two-year average growth rate of 5.0%.

It should be pointed out that the 18.3% year-on-year GDP growth in the first quarter was an unusual growth under the low base effect. While the GDP growth in the first quarter was impressive, it was still slightly below market expectations of 20% growth. In particular, the economy grew by 0.6% quarter-on-quarter in the first quarter, 2.6 percentage points lower than the quarter-on-quarter growth rate in the fourth quarter of 2020, indicating a slowdown in the pace of economic recovery. Taking the first quarter of 2019 as the base, China’s GDP growth averaged 5% over two years, and this is still lower than the 5.8% growth rate in the fourth quarter of 2019 before the outbreak of the COVID-19 pandemic.

Figure: China’s quarterly economic growth rate in recent years

China’s quarter-on-quarter and year-on-year economic growth rates in recent years

China’s quarter-on-quarter GDP growth rate

Source: China’s National Bureau of Statistics. Graphic: ANBOUND.

Data from the major sectors of the economy provides a more detailed picture of the economy’s performance in the first quarter.

In terms of industrial growth, in March, the value-added of the industrial enterprises above designated size grew by 14.1% year-on-year. In the first quarter, the value-added of the industrial enterprises above designated size grew by 24.5% year-on-year, up 14.0% compared with the same period in 2019, and the two-year average growth rate was 6.8%, close to the 6.9% growth rate at the end of 2019 before the outbreak of the pandemic. However, the year-on-year growth slowed to 14.1% in March, below the average market forecast of 15.4%. In particular, industrial growth slowed to a seasonally adjusted 0.6% quarter-on-quarter, the first deceleration since December 2020. Some market analysts believe that the industrial output in March did not continue the remarkably high growth in January-February is one of the reasons why the year-on-year GDP growth in the first quarter did not reach the 20% upper limit as expected by the market.

In terms of investment, from January to March, China’s fixed asset investment (excluding rural households) was RMB 9.5994 trillion, up 25.6% year-on-year and up 2.06% compared with October-December last year after seasonally adjusted; it was 6.0% higher than that from January to March in 2019, with an average growth rate of 2.9% in two years. Among them, private investment in fixed assets was RMB 5.5022 trillion (accounted for 57.3% of the total investment), up 26.0% year-on-year. On a month-on-month basis, investment in fixed assets (excluding rural households) rose 1.51% in March. By industry, the investment in the primary industry was RMB 236.2 billion, up 45.9% year-on-year; the investment in the secondary industry was RMB 2.792.9 trillion, up 27.8%; the investment in the tertiary industry reached RMB 6.5703 trillion, up 24.1%. It can be seen that the growth of investment in the first quarter has maintained relatively strong momentum. In addition to the significant year-on-year growth, investment has also maintained a significant quarter-on-quarter growth, and maintained positive growth in March.

Consumption growth, which was negative last year, turned positive in the first quarter of this year. In March, the total retail sales of consumer goods reached RMB 3.5484 trillion, a year-on-year increase of 34.2% (well above market expectations of 28%); it was 12.9% higher than that in March 2019, with an average growth rate of 6.3% in two years. After deducting price factors, the total retail sales of consumer goods in March 2021 increased by 33% in real terms, with an average growth of 4.4% in two years. On a month-on-month basis, the total retail sales of consumer goods increased by 1.75% in March. From January to March, the total retail sales of consumer goods reached RMB 10.5221 trillion, a year-on-year increase of 33.9%, with an average growth rate of 4.2% in two years; after seasonal adjustment, it increased by 1.86% compared with October to December last year. In terms of online retail sales, from January to March, China’s online retail sales reached RMB 2.8093 trillion, a year-on-year growth of 29.9% and an average growth of 13.5% in two years. Of this, online retail sales of physical goods reached RMB 2.3067 trillion, an increase of 25.8%, with an average growth of 15.4% in two years, accounting for 21.9% of the total retail sales of consumer goods. If retail consumption growth is sustained, it will provide important support for China’s economic recovery this year.

In terms of income and expenditure, the nationwide per capita disposable income has reached RMB 9,730 in the first quarter, a nominal increase of 13.7% year-on-year, with an average two-year growth of 7.0%, or a real increase of 13.7% year-on-year after deducting price factors, with an average two-year growth of 4.5%. In the first quarter, the growth rate of per capita disposable income has increased quarter by quarter, maintaining stable recovery growth, but it was still significantly lower than the economic growth rate in the same period. In terms of urban and rural areas, the per capita disposable income of urban households was RMB 13,120, a nominal increase of 12.27% year-on-year and a real increase of 12.3%; the per capita disposable income of rural households was RMB 5,398, a nominal increase of 16.3% year-on-year and a real increase of 16.3% after deducting price factors. In the first quarter, China’s per capita consumption expenditure reached RMB 5,978, a nominal increase of 17.6% year-on-year or a real increase of 17.6% after deducting price factors; it was 8.0% higher than that the first quarter of 2019 with two-year average growth of 3.9% or 1.4% after deducting price factors.

In terms of foreign trade, China’s merchandise imports and exports amounted to RMB 8.47 trillion in the first quarter of this year, up 29.2% year-on-year, according to the General Administration of Customs. Among them, exports grew 38.7% to RMB 4.61 trillion, imports grew 19.3% to RMB 3.86 trillion, and the trade surplus reached RMB 759.29 billion, an increase of 690.6%. In March, China’s dollar-denominated exports grew 30.6% year-on-year, down 30 percentage points from January-February, while dollar-denominated imports increased by 38.1%, up 15.9 percentage points from January-February. The trade surplus for the month was USD 13.8 billion, down USD 89.46 billion from January-February. In RMB terms, exports rose 20.7% in March from a year earlier, down 29.4 percentage points from January-February, while imports grew by 27.7%, up 13.2 percentage points from January-February. The trade surplus in the same month was RMB 87.98 billion, a decrease of RMB 587.88 billion. It can be seen that with the economic recovery at home and abroad, China’s imports and exports have seen significant growth. The growth rate of imports exceeds that of exports, showing the characteristic of China as the “world’s factory”.

Overall, China’s economy grew sharply in the first quarter as expected due to a low base effect. However, the growth rate was lower than the market had expected. As ANBOUND has pointed in the past, to fully understand the actual situation of China’s post-pandemic economic growth, one should look at the economic growth in the past three years as a whole. Therefore, China’s quarterly economic growth this year will be high at the beginning of the year, and it will be lower afterwards. It is expected that the economic growth over the next year or two will be significantly slower than that of this year.

It is also important to note that China can no longer be the star performer of the world’s major economies, as it was last year. As vaccines continue to roll out, the global economy will generally recover in 2021, with the U.S. economy in particular rebounding strongly. According to Federal Reserve’s officials, the U.S. economy is expected to grow by 6.5% this year, with the inflation rate rising to around 2.5% and the unemployment rate falling to around 5% by the end of the year. Other institutions expect the U.S. to be the locomotive of global economic growth this year, contributing more to global economic growth than China; the U.S. economy will still be able to grow at 3.5% by 2022.

Final Analysis Conclusion:

As both the world economy and the Chinese economy are on the track of recovery, the most crucial goal for the Chinese economy is not to pursue a single year’s growth, but to maintain stability for at least three years, while addressing its internal problems of the Chinese economy. In this regard, China’s macro policy is expected to focus on the twin goals of “stability” and “risk prevention,” and the pursuit of balanced growth.

Founder of Anbound Think Tank in 1993, Chan Kung is now ANBOUND Chief Researcher. Chan Kung is one of China’s renowned experts in information analysis. Most of Chan Kung‘s outstanding academic research activities are in economic information analysis, particularly in the area of public policy.

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Accelerating COVID-19 Vaccine Uptake to Boost Malawi’s Economic Recovery



Lunzu market in southern Malawi. WFP/Greg Barrow

Since the onset of the COVID-19 pandemic, many countries including Malawi have struggled to mitigate its impact amid limited fiscal support and fragile health systems. The pandemic has plunged the continent into its first recession in over 25 years, and vulnerable groups such as the poor, informal sector workers, women, and youth, suffer disproportionately from reduced opportunities and unequal access to social safety nets.

Fast-tracking COVID-19 vaccine acquisition—alongside widespread testing, improved treatment, and strong health systems—are critical to protecting lives and stimulating economic recovery. In support of the African Union’s (AU) target to vaccinate 60 percent of the continent’s population by 2022, the World Bank and the AU announced a partnership to assist the Africa Vaccine Acquisition Task Team (AVATT) initiative with resources, allowing countries to purchase and deploy vaccines for up to 400 million Africans. This extraordinary effort complements COVAX and comes at a time of rising cases in the region.

I am convinced that unless every country in the world has fair, broad, and fast access to effective and safe COVID-19 vaccines, we will not stem the spread of the pandemic and set the global economy on track for a steady and inclusive recovery. The World Bank has taken unprecedented steps to ramp up financing for Malawi, and every country in Africa, to empower them with the resources to implement successful vaccination campaigns and compensate for income losses, food price increases, and service delivery disruptions.

In line with Malawi’s COVID-19 National Response and Preparedness Plan which aims to vaccinate 60 percent of the population, the World Bank approved $30 million in additional financing for the acquisition and deployment of safe and effective COVID-19 vaccines. This financing comes as a boost to Malawi’s COVID-19 Emergency Response and Health Systems Preparedness project, bringing World Bank contributions in this sector up to $37 million.

Malawi’s decision to purchase 1.8 million doses of Johnson and Johnson vaccines through the AU/African Vaccine Acquisition Trust (AVAT) with World Bank financing is a welcome development and will enable Malawi to secure additional vaccines to meet its vaccination target.

However, Malawi’s vaccination campaign has encountered challenges driven by concerns regarding safety, efficacy, religious and cultural beliefs. These concerns, combined with abundant misinformation, are fueling widespread vaccine hesitancy despite the pandemic’s impact on the health and welfare of billions of people.  The low uptake of COVID-19 vaccines is of great concern, and it remains an uphill battle to reach the target of 60 percent by the end of 2023 from the current 2.2 percent.

Government leadership remains fundamental as the country continues to address vaccine hesitancy by consistently communicating the benefits of the vaccine, releasing COVID data, and engaging communities to help them understand how this impacts them.

As we deploy targeted resources to address COVID-19, we are also working to ensure that these investments support a robust, sustainable and resilient recovery. Our support emphasizes transparency, social protection, poverty alleviation, and policy-based financing to make sure that COVID assistance gets to the people who have been hit the hardest.

For example, the Financial Inclusion and Entrepreneurship Scaling Project (FInES) in Malawi is supporting micro, small, and medium enterprises by providing them with $47 million in affordable credit through commercial banks and microfinance institutions. Eight months into implementation, approximately $8.4 million (MK6.9 billion) has been made available through three commercial banks on better terms and interest rates. Additionally, nearly 200,000 urban households have received cash transfers and urban poor now have more affordable access to water to promote COVID-19 prevention.

Furthermore, domestic mobilization of resources for the COVID-19 response are vital to ensuring the security of supply of health sector commodities needed to administer vaccinations and sustain ongoing measures. Likewise, regional approaches fostering cross-border collaboration are just as imperative as in-country efforts to prevent the spread of the virus. United Nations (UN) partners in Malawi have been instrumental in convening regional stakeholders and supporting vaccine deployment.

Taking broad, fast action to help countries like Malawi during this unprecedented crisis will save lives and prevent more people falling into poverty. We thank Malawi for their decisive action and will continue to support the country and its people to build a resilient and inclusive recovery.

This op-ed first appeared in The Nation, via World Bank

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An Airplane Dilemma: Convenience Versus Environment



Mr. President:  There are many consequences of COVID-19 that have changed the existing landscape due to the cumulative effects of personal behavior.  For example, the decline in the use of automobiles has been to the benefit of the environment.  A landmark study published by Nature in May 2020 confirmed a 17 percent drop in daily CO2 emissions but with the expectation that the number will bounce back as human activity returns to normal.

Yet there is hope.  We are all creatures of habit and having tried teleconferences, we are less likely to take the trouble to hop on a plane for a personal meeting, wasting time and effort.  Such is also the belief of aircraft operators.  Add to this the convenience of shopping from home and having the stuff delivered to your door and one can guess what is happening.

In short, the need for passenger planes has diminished while cargo operators face increased demand.  Fewer passenger planes also means a reduction in belly cargo capacity worsening the situation.  All of which has led to a new business with new jobs — converting passenger aircraft for cargo use.  It is not as simple as it might seem, and not just a matter of removing seats, for all unnecessary items must be removed for cargo use. They take up cargo weight and if not removed waste fuel.

After the seats and interior fittings have been removed, the cabin floor has to be strengthened.  The side windows are plugged and smoothed out.  A cargo door is cut out and the existing emergency doors are deactivated and sealed.  Also a new crew entry door has to be cut-out and installed. 

A new in-cabin cargo barrier with a sliding access door is put in, allowing best use of cargo and cockpit space and a merged carrier and crew space.  A new crew lavatory together with replacement water and waste systems replace the old, which supplied the original passenger area and are no longer needed.

The cockpit gets upgrades which include a simplified air distribution system and revised hydraulics.  At the end of it all, we have a cargo jet.  If the airlines are converting their planes, then they must believe not all the travelers will be returning after the covid crisis recedes.

Airline losses have been extraordinary.  Figures sourced from the World Bank and the International Civil Aviation Organization reveal air carriers lost $370 billion in revenues.  This includes $120 billion in the Asia-Pacific region, $100 billion in Europe and $88 billion in North America.

For many of the airlines, it is now a new business model transforming its fleet for cargo demand and launching new cargo routes.  The latter also requires obtaining regulatory approvals.

A promising development for the future is sustainable aviation fuel (SAP).  Developed by the Air France KLM Martinair consortium it reduces CO2 emissions, and cleaner air transport contributes to lessening global warming.

It is a good start since airplanes are major transportation culprits increasing air pollution and radiative forcing.  The latter being the heat reflected back to earth when it is greater than the heat radiated from the earth.  All of which should incline the environmentally conscious to avoid airplane travel — buses and trains pollute less and might be a preferred alternative for domestic travel.

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There Is No Business, Like Small Business: New Strategy



Marc Chagall, Circus Horse, 1964

Once upon a time, all big businesses of the world were only small businesses. However, occasionally, when big businesses classified as too big to fail, it is the special status when they start failing their own nations, damaging common good, hurting humankind at large. This is when big business allowed to morph into a Godzilla to trample all over the governments and institutions and line them up as hostages. Study the rise and fall of the world’s largest business empires of last century. 

Now Showtime: There is no business, like small business, because the small business sector is not only a giant business, but also the biggest layer of the economy, largest contributor in kind to its nation, adding jobs, paying taxes and creating real value creation, while taking all the abuse and bureaucratic nonsense.  Hence, post pandemic recovery will take no prisoners and harshly unleash economic challenges as mirror on the economic development competency and question national priorities. Here, no worries, as usual the big business will always take care of itself. Small business will be the only game left in town, something for the political leadership to cling on to and something for local trade groups to try to claim as success. The definitions on what is big and what is small are both on the table for honest evaluation and equally juxtaposed need a declaration on what business serves the economy of the nation and what business destroys the economies of nation.

New math of the post pandemic world clearly shakes down old mindsets. Unless national economic development leaders, trade groups and trade associations acquire proven entrepreneurial experiences, expertise and tactical battlefield capability at the very top and display a warrior mindset to upskill for global competitive excellence, they are just a dance party with water pistols.  Entrepreneurialism is the real value creation driving force behind the economy and not a value manipulation exercise with some certificates. Any misunderstanding on such issues only creates shiny cities, surrounded by tent-cities. Study the global economic chaos and worklessness is creeping across the world.

The illusion of super big technology driving super global growth is another myth of crypto-tyrannies. The worshiping super magnanimous technologies, including Facebook engaged in stealing the future from the next generations, now manipulating data to divide and conquer elections and serving special agenda groups causing tribalism and global socio-economic damage. Study how the future routinely stolen in broad daylight by Social Media. 

Mutation of economic thought:  Why is creation of fake economies much easier; this is where zeros bought, sold and traded as real assets, everything multiplied, subtracted, divided but nothing adds up, there are no bottom-line totals, ever. When columns do not fit anywhere, like an abstract art on canvas, for the eye of the beholder they glow in the dark. Hence, cubism-finances  and impressionist-economies, while on the other hand, real value creation economy is one of the hardest journeys,it isrealentrepreneurialism wrapped in integrity and solid hard day’s work creating common good. The reason is that small medium businesses have lost trust in their government and major institutions, while they paint the economy as abstract art and print invisible unlimited money but SME only thrown in jail if they only photocopy a dollar bill.  Covidians demand a new narrative on economic affairs and overall totals of budgets.

Unless trade groups of nations assembled and thanked profusely for their work done over the last century. Invited to join as new players, as this is now a new page for a new age and a new direction for a new digital future. Let meritocracy chart out the future of trade-groups; let vertical sectors build their own independent global age narratives to ride on entrepreneurial mindsets. When methodical agenda on simultaneous synchronization bring all key components under master plan tabled critical thinking and hardcore business experiences should lead. When vertical groups and all upskilling and reskilling features interact on digital platforms combined, eventually they will all see the light and most importantly learn the future of the global-age of digital commerce. Upskilling of all layers is critical so all grow together. Reskilling to create real value production is essential so it becomes a sustainable model. 

With no room to spend another decade on some academic feasibility studies, organize a warrior team to undertake such mobilization developments. Such national mandates are often not new funding dependent rather execution starved and deployment hungry. Why shut down the electricity of the building and climb the skyscraper via the staircase.  With the majority of nations locked up in an old mindset on digitization, today, they simply cannot zip up to the top floor, exhausted and breathless as they are climbing stairs and badly stuck on lower floors.  Pandemic recovery is harsh. Fire the first person who says they need heavy new funding, fire the second person who says they are too busy to change. Change is a gift for free but for the right mindset.

The New Trends: National mobilization of entrepreneurialism will advance; small and medium businesses will grow, as they have no choice but to upskill innovative excellence and reskill for quality manufacturing of goods and services. Learn from Asia, study Africa, stop reading newspapers but the world maps, acquire new math from ‘population-rich-nations’, and expand collaborative alliances with the knowledge-rich-nations to reach global markets.

New Trends on Small Medium Business Economy:

The new math:  why all over the world it is now attracting new entrepreneurs at rapid speed? Why are Covidians all over the world refusing high-rise, low pay, cubical-slavery and transforming to creative freedom, global-age access and hammocks. Today a USD $1000 investment in technology buys digital solutions, which were million dollars, a decade ago. Today, any micro-small-medium-enterprise capable of remote working models can save 90% of office and bureaucratic costs and suddenly operate like a mini-multi-national with little or no additional costs.

The new uplifts: How struggling economies are now exploring the “National Mobilization of Entrepreneurialism on Digital Platforms of Exportability Protocols” as alternate revolutionary thinking. Study how Africa model under Dr. Ameenah Gurib-Fakim is expanding and why the groups of western developed economies are so fearful of such a mega shift in thinking. Study Expothon on Google.

The new speed: If Agrarian age to industrial age took a millennia, while industrial age to computer age took a century, now from cyber-age to paperless, cash-less, office-less and work-less age it is almost knocking the door, just open and see. Is this the revenge of The Julian Calendar, time like a tsunami drowning us in our own depths of performance, challenging our lifelong learning and exposing our critical thinking forcing us to fathom the pace of change, swim or drown?

Time to study deeply, why forest fires always put out by creating more selected fires;  therefore let government and bureaucracy stay where they are, while creating a far superior brand new meritocracy centric digital firefighting unit to act at the top and bring required results. The cost is a fraction of what routinely wasted 1000 times in lost and missed opportunities.

Time to appreciate, why is the fear of exposure of limited talent the number one fear of adapting digitizationas digital-divide is just a mental-divide.Why without digitization there is no economy and why it has taken decades?

Time to apply entrepreneurial mindset, why incentivizing all frontline management of all midsize business economic development and foreign investment attraction and export promotion bodies is a requirement of time? Observe the power of entrepreneurial mindset in the driver seat, deploy national mobilization of midsize economies, accept upskilling as a national mandate, and digitization as national pride.

Is there any authoritative leadership on entrepreneurialism present in the boardroom?  No need to have chills, as mainly from Asia, there are some 500 million new entrepreneurs already on the march, therefore, no need to ask where are they headed but rather ask where your national entrepreneurialism is going? Study why entrepreneurialism is neither academic-born nor academic centric, why all most successful legendary founders that created earth shattering organizations were only the dropouts?

Is there a new realization or back to water pistol games? Not to be confused with academic courses on fixing Paper-Mache economies and already broken paperwork trails, chambers primarily focused on conflict resolutions, compliance regulations, and trade groups on taxation policy matters.  Mobilization of small medium business economy is a tactical battlefield of advancements of an enterprise, as meritocracy is the nightmarish challenges for over 100 plus nations where majority high potential sectors are at standstill on such affairs. Surprisingly, such advancements are mostly not new funding hungry but mobilization starved. Observe the trail of silence. The empty shelves are not supply chain issues but symptoms of broken down economies. Economies are not cryptopia; they are about real value creation by the local small medium business forces to create local grassroots prosperity. The failure is not having the right mindsets.

Five things to watch for the year 2022: US election will surprise the world as it has the last two times. World economies tested, financially along with leadership competency levels. Big business will remain big and undisturbed.  The Covidian will march for truth. Small medium business mobilization will further grow as a reliable answer to the economy and jobs.This is how humankind will crawl towards critical thinking.

The rest is easy

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