China’s economy has recovered swiftly after the virus-induced plunge in the first quarter and will enter 2021 on a strong footing, reported Oxford Economics.
The firm identified four key themes:
Growth should rotate toward consumption and corporate investment, while investment in infrastructure and, to a lesser extent, real estate, slows down. Export prospects are good, reflecting the strong global recovery, even as China’s relative performance is set to be less impressive than in 2020.
Tighter macro policy will weigh on sequential growth. We forecast tighter fiscal policy, including via more restrained infrastructure spending. On the monetary side, we expect policymakers to aim to contain macro leverage. China’s balance of payments should remain relatively solid, supported by capital inflows amid relatively high interest rates. This should support some modest further CNY appreciation. We also expect more exchange-rate flexibility.
