China’s economy grew by 2.3% in 2020 and 6.5% in the fourth quarter, reflecting a further recovery from the pandemic. Both industrial and services activity expanded at a faster pace in Q4 and contributed more to GDP. We expect the recovery in China to continue in the new year, and are maintaining our 2021 forecast of 7.5%.
Investments and exports were the key drivers of the Chinese recovery, helped by fiscal stimulus and strong external demand for work from home products. Fixed asset investment increased 2.9% industrial production expanded by 2.8%, and goods exports were up 4% in 2020. However, retail sales of consumer goods, a major indicator of consumption growth, fell 3.9% in 2020.
That said, with pandemic measures subsequently relaxed and people allowed to travel across the country, retail sales quickly recovered in the second half of 2020. Online retail sales, which accounted for 30% of total retail sales, grew by 10.9% in 2020.