This morning, the National Bureau of Statistics released preliminary full-year GDP figures. The most frequently mentioned number by the media is that GDP surpassed the 100 trillion yuan mark for the first time, reaching 101.5986 trillion yuan. However, this is just a news point from breaking a large integer; the real good news is that the annual GDP growth rate reached 2.3%. This is not only better than international forecasts but also better than the most optimistic predictions made by domestic economists just days ago. This means China's economic recovery has run ahead of all forecasts. Recall that in June this year, the International Monetary Fund predicted China's full-year GDP growth at only 1%, and in October, it was revised up to 1.9%. As recently as the 6th of this month, Global Times reported that multiple domestic economists predicted China's GDP growth in 2020 could reach 2%. A few days later, the answer was revealed: not only did it reach 2%, but it directly hit 2.3%. Compared to the downward revisions and negative growth in other countries, this is truly impressive. Today, Ning Jizhe, director of the National Bureau of Statistics, said that China's economic output is expected to account for 17% of the world economy in 2020. This trend has been recognized globally. According to the forecast of the world's top strategic consulting firm, BlackRock Investment Institute, by 2025, China's GDP is expected to account for 20% of the global total. As seen in the chart below, 2020 is a key year for increasing the share. Source: BlackRock Investment Institute When the enemy retreats, we advance. Many people are concerned about the gap with the United States. There is a special aspect of this year's GDP: if converted to US dollars, China's GDP growth rate is 11%. How does this happen? The revised GDP for 2019 was 98.65 trillion yuan, converted at the then exchange rate of 6.97, which is 14.15 trillion US dollars; the 2020 GDP is 101.6 trillion yuan, converted at the current exchange rate of 6.48, which is 15.7 trillion US dollars. Therefore, calculated in US dollars, China's 2020 GDP grew by (15.7-14.15)÷14.15=0.109540636, or 11%. Calculated in RMB, China's 2020 GDP grew by 2.3%, but in US dollars, it grew by 11%. This gap is due to exchange rate changes. This year, the US dollar depreciated while the RMB appreciated, making the RMB more powerful in purchasing power, while the US dollar depreciated significantly due to excessive issuance. Additionally, according to IMF forecasts, the US GDP in 2020 is about 21 trillion US dollars, with a negative growth of 4.3% (US GDP in 2019 was 21.43 trillion US dollars). Thus, in this special year of 2020, the gap between China and the US GDP will narrow from 7.28 trillion in 2019 to 5.3 trillion. Of course, we must be clear that this narrowing is due to special circumstances. As the US economy recovers, exchange rates change, and the impact of the trade war, the gap may widen again. We should be aware of this and not be overly excited! After the good news, let's talk about the hidden concerns we see in the statistics. Problem 1: Why was consumption weak in 2020? Although GDP growth was decent, looking at the data closely, the main drivers of GDP growth were investment and imports/exports. Moreover, the most active investment was in real estate development, growing by 7.0%, significantly higher than other areas. Foreign trade exports first declined then rose, benefiting from China's good control of the epidemic and being the first to resume supply chains globally, ultimately reaching 17.9326 trillion yuan, a full-year growth of 4%. But the export boom is clearly temporary. In contrast, consumption: total retail sales of consumer goods in 2020 were 39.1981 trillion yuan, down 3.9% from the previous year. This aligns with statistics on residents' income and expenditure. The per capita consumption expenditure of national residents was 21,210 yuan, a nominal decrease of 1.6% from the previous year, and a real decrease of 4.0% after deducting price factors. Source: National Bureau of Statistics More troubling is that the decline in consumption this year was across the board: urban retail sales of consumer goods were 33.9119 trillion yuan, down 4.0%; rural retail sales were 5.2862 trillion yuan, down 3.2%. By type: catering revenue was 3.9527 trillion yuan, down 16.6%; retail sales of goods were 35.2453 trillion yuan, down 2.3%. By format: department stores, specialty stores, and franchised stores declined by 9.8%, 5.4%, and 1.4% respectively (only supermarkets reversed the trend due to stockpiling purchases during home isolation, growing 3.1% year-on-year). The only segments with growth in consumption were high-end consumption. Data shows that in the fourth quarter, retail sales of communication equipment, cosmetics, and gold, silver, and jewelry above designated size grew by 26.0%, 21.2%, and 17.3% year-on-year, respectively. This indicates a widening wealth gap: the rich are unaffected in consumption, while the poor see shrinking consumption. We know that the marginal propensity to consume of the rich is low; for every 100 yuan the poor earn, they may spend 80 yuan on food and clothing, while the rich may spend only 10 yuan. As the data reflects, the epidemic has severely impacted the income of the bottom tier, leaving them with no money to spend, and the problem of weak consumption is hard to improve. Another important consumption trend, closely related to the e-commerce industry, is the accelerating shift online. Source: National Bureau of Statistics Full-year online retail sales were 11.7601 trillion yuan, up 10.9% year-on-year. Despite an overall decline of 3.9% in the consumption market, online retail still achieved double-digit growth. E-commerce has independently supported the market during the epidemic, which is somewhat comforting. Online retail sales of physical goods were 9.759 trillion yuan, up 14.8%, with food, clothing, and daily necessities growing by 30.6%, 5.8%, and 16.2%, respectively. Online retail sales of physical goods accounted for 24.9% of total retail sales of consumer goods, up 4.2 percentage points from the previous year. Previously, everyone thought 20% was the ceiling, but now it's nearly 25% and still growing. It seems e-commerce is no longer just a channel or a model, but a true commercial infrastructure. Furthermore, the growth in food category is as high as 30.6%, indicating that the new growth point for future consumption lies in the broad food sector. Whether there is an epidemic or not, eating and drinking are always the top priority, and this will be the main track for the rise of new consumer brands. Consumption upgrades may not be prominent in other categories, but in food, the upgrade will continue. In clothing, online retail grew by 5.8%, while in the total social consumer goods, clothing expenditure fell by 7.5%. This contrast highlights the plight of offline physical clothing stores. The epidemic reduced social interactions, lowering the demand for new clothes. In daily necessities, growth was 16.2%. These are mainly household items. This category will continue to grow at a high rate in the future. Life consists of eating, clothing, housing, transportation, and daily necessities. Clothing and transportation are suppressed, housing is a large expenditure, and only eating and daily necessities can be continuously upgraded and refined. Therefore, eating and daily necessities will be the main growth points in the future. Per capita consumption expenditure and composition of national residents in 2020 (Source: National Bureau of Statistics) Problem 2: Whose income was most affected? If weak consumption were only due to special reasons like home isolation, recovery would be quick. At the beginning of the year, when the epidemic was just being contained, financial media circles were discussing whether there would be revenge spending like in 2008. It turned out that there was only normal compensatory consumption, not revenge spending. Later, it was discovered that this wave of weak consumption was caused by income decline, especially for low-income groups, who were most affected by the epidemic. According to the National Bureau of Statistics, the per capita disposable income of national residents was 32,189 yuan, a nominal increase of 4.7% from the previous year, and a real increase of 2.1% after deducting price factors, basically in sync with economic growth. This year, the statement that "600 million people in China have a monthly income below 1,000 yuan" sparked huge discussion. These 600 million people, roughly half of China's population, how did they fare this year? Screenshot from Xinhua Net The median better reflects their situation than the average: In 2020, per capita disposable income was 32,189 yuan, with a nominal growth of 4.7%; The median per capita disposable income was 27,540 yuan, with a nominal growth of 3.8%, nearly one percentage point lower, a difference of nearly 5,000 yuan. Looking at the five income groups: the low-income group had per capita disposable income of 7,869 yuan (up 6.6% year-on-year), the lower-middle income group had 16,443 yuan (up 4.2%), the middle income group had 26,249 yuan (up 4.8%), the upper-middle income group had 41,172 yuan (up 4.9%), and the high-income group had 80,294 yuan (up 5.1%). The growth rates show a pattern of high at both ends (the low-income group's growth is clearly due to targeted poverty alleviation), with the high-income group's growth rate far exceeding that of the middle groups, further widening the income gap. This is exactly what many economists worry about: the shrinking consumption of low-income groups may continue to worsen. Overall, given the difficult domestic and international environment last year, achieving such economic growth is gratifying. Although there are still hidden concerns in some areas, as long as we are not carried away by victory, see the crux of the problems clearly, and make corresponding adjustments, I believe China's future will be better and better. Let's continue to work hard in 2021. Source: 调皮电商 (ID: tiaopiEC), Author: 木芯 Tips will be paid 400-2000 yuan upon adoption.