China's economic slowdown is not as severe as it seems

China's economic slowdown is not as severe as it seems


China recently announced that real growth last year was 8.1 percent, which will almost certainly turn out to be the fastest of any major economy. But much of the analysis in news media in the West has focused on the marked slowdown on a quarterly basis, to only 4 percent in the last calendar quarter. However, this approach is misleading. It fails to consider China's highly unusual pattern of growth in 2020, which was marked by a sharp decline in economic output in the first quarter because of COVID-19 lockdowns.

But China quickly brought the pandemic under control, and growth resumed in the second quarter of 2020 and accelerated further over the second half. Thus, output in 2021 in the first quarter was 18.3 percent above the depressed level of 2020. The pace of expansion in subsequent quarters compared to the prior year inevitably fell, since the level of output in the previous year was successively higher.

A more useful approach to understanding China's growth last year is to compare output in each quarter with the same quarter in 2019, the last pre-pandemic year. On that basis average annual growth in the four quarters of 2021 was, respectively, 4.9, 5.5, 4.9, and 5.2 percent. In short, not much of an upward or downward trend.

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