China’s fourth quarter GDP, alongside industrial production and retail sales data are among the top macro events on Monday. The readings will likely set the tone for Asia-Pacific markets, especially the Australian Dollar and the Hang Seng Index. US markets will be closed on Monday, 18 January for the Martin Luther King Jr Day holiday.
The world’s second-largest economy is expected to register an annualized growth rate of 6.1% in Q4 2020, marking a robust recovery from the Covid-19 pandemic and outshining other major economies. The IMF forecasted that China’s GDP grew 1.9% in 2020, compared to a global contraction of 4.4%. Looking ahead, market participants expect China’s economic growth to accelerate further to 8-9% in 2021, partly due to a lower base in 2020.
China’s economy rebounded swiftly after plunging 6.8% YoY in Q1 2020, thanks to strong fiscal and monetary responses as well as prompt measures to contain the Covid-19 pandemic. This facilitated a fast economic re-opening after initial lockdowns in the spring. Exports were then boosted by strong global demand for medical supplies, equipment and electronics in a time when business activity in many parts of the world was disrupted by viral waves. Domestic consumption has gradually picked up too, although retail sales growth remains slightly below the pre-Covid level.
Chinese industrial production growth in December is expected to recede slightly to 6.9% from 7.0% in November, while retail sales growth is forecasted to expand at a pace of 5.5%, marking a nine-month high. Upbeat figures will likely underpin Asia-Pacific equities, the Chinese Yuan as well as the risk-linked Australian and New Zealand Dollars.