2020 Monetary Policy Report

The current economic background

In 2020, the world's most threatening challenge was the economic, social, and public health impacts of the COVID-19 pandemic. Even so, China is still the second largest global economy, the largest exporter, and has the largest exchange reserves in the world. However, even though China has one of the fastest-growing GDPs in the world, its economic growth was abruptly slowed to 1.9% in 2020, against 6.1% in 2019, due to the impact of the COVID-19 pandemic. Although the trade war with the US continued, it no longer was the most pressing issue for China in 2020. Yet, with two major shocks affecting the Chinese economy, it is too early to quantify how much the trade war did affect the Chinese economy. The situation did put quite a significant pressure on the government budget; the budget balance reached a record low of -10.2% of GDP in 2020 compared to -5.9%the previous year. Debt has risen to 61.7%, and this number might have to be corrected upwards when the final numbers are in.

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