BEIJING—China’s geopolitical rise over the past four decades has been fueled by sizzling economic growth that regularly featured years of double-digit percentage-point gains.
In 2020, China advanced its aspirations by simply emerging with its growth intact from a brutal year when a pandemic shook the world economy.
On Monday, Beijing said its gross domestic product rose 2.3% last year. While that is the weakest annual rate of growth since the Mao era, it was enough to make China the only major world economy to gain any ground at all last year, and accelerated its likely overtaking of the U.S. economy, economists say.
The World Bank projects the global economy to have pulled back by 4.3% last year, dragged down by a 7.4% contraction in the eurozone. The U.S., the world’s largest economy, is expected to have shrunk by 3.6%.
In per-capita terms, China’s GDP, which surpassed $10,000 for the first time, remains far behind the U.S.’s $65,000. But the sheer size of its market, combined with its weathering of the worst economic downturn in memory, means that China is arguably entering the new year with a stronger hand—an advantage that leader Xi Jinping is expected to make use of after President-elect Joe Biden is sworn into office on Wednesday.
China was able to rescue its economy by aggressively moving to stamp out the virus—though only after several critical weeks in which authorities were initially slow to act as it spread in the central Chinese city of Wuhan.
By the time Western countries were hit with the first wave of infections in the spring, China’s formidable factory floor was revving back up again, helped by government measures targeted at restoring industrial production. Chinese exports, together with ramped-up infrastructure spending, powered a recovery that steadily picked up steam throughout the year. Officials said last week that exports in 2020 climbed to an all-time high.
After suffering a 6.8% contraction in the first three months of the year, China’s economy notched three quarters of progressively stronger gains, culminating in a 6.5% expansion in the final three months of the year, officials said Monday—putting China back on its pre-Covid-19 trajectory.
“We had a perfectly V-shaped recovery profile in China, whereas the U.S. looks more like a W,” said Michael Spencer, chief Asia-Pacific economist for Deutsche Bank. “It will have taken the U.S. a year longer than China to get back to the pre-Covid path.”
In getting back to normalcy well ahead of the Western world, the world’s second-largest economy has gained significant ground on the U.S., while helping the globe avert what would have otherwise been an even grimmer year.
China’s increase in its share of global GDP last year—1.1 percentage points—marks its largest such jump in a single year since at least the 1970s.
Forecasters now expect China’s economy to grow by another 8% or more in 2021, helping put it on track to overtake the U.S. as the world’s largest economy by 2028, as many as five years earlier than pre-coronavirus projections.
“China’s exceptional economic performance during the pandemic has caused the gap to shrink,” Axel Weber, chairman of UBS Group AG , said last week.
Mr. Weber, citing International Monetary Fund data, has moved forward his projected timeline for China’s economy to reach parity with the U.S. to 2028, from an earlier forecast of 2030.
The Centre for Economics and Business Research, a London-based research firm has also moved up its forecast for the day of parity to 2028, albeit from a pre-coronavirus projection that China would surpass the U.S. in 2033.
That expedited timeline is based in part on China’s robust industrial rebound last year—but, equally importantly, on Beijing refraining from joining the Federal Reserve and other global central banks as they took rates to near-zero levels.
China’s higher interest rates attracted a flood of capital, buoying the yuan against the greenback and increasing the value of China’s economic activity in U.S. dollar terms, said Douglas McWilliams, CEBR’s deputy chairman.