China’s Q4 GDP growth surprised on the upside, but risks to the outlook have increased

Highlights:

• This morning, China published its Q4 GDP growth alongside with December monthly activity data. Q4 growth accelerated to 6.5% yoy which lifted total 2020 GDP to 2.3%. 
• December real activity data were more mixed. While exports came in strongly, important domestic demand components were a bit unsteady. 
• Total Social Financing and money supply surprised on the downside. While some prominent SOE defaults may have prompted more caution in the bond sector, we see the PBoC to already shift its monetary policy to a more neutral stance. 
• More generally, less supportive monetary and fiscal policy in 2021 implies a slowing monetary and fiscal impulses and thus less growth dynamics over the course of the year. 
• Risks have risen of late due to fresh local outbreaks of Covid-19. Even given a successful containment, consumer confidence could suffer again a bit. We stay on the more cautious side and maintain our below-consensus growth forecast of 7.8% in 2021. 

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