JAKARTA (TheInsiderStories) – China’s economy grew at its slowest pace in nearly three decades in 2019. Data from the National Bureau of Statistics showed on Friday (01/17) the world’s second-largest economy expanded by 6.1 percent, the slowest pace in 29 years but still within the government’s target of 6 to 6.5 percent.
The Chinese economy advanced 6.0 percent year-on-year in the December quarter of 2019, the same as in the previous quarter and matching market expectations. This remained the weakest growth rate since the first quarter of 1992, amid trade pressure from the United States (US) and sluggish demand from home and abroad.
On a quarterly basis, however, the economy grew 1.5 percent in October-December, also in line with expectations and the same pace as the previous three months. December data showed a surprising acceleration in factory output and investment growth, while retail sales grew at a steady, solid pace.
Industrial output grew 6.9 percent in December from a year earlier, the strongest pace in nine months. Fixed-asset investment rose 5.4 percent for the full year, versus expectations for a 5.2 percent increase, the same as in the first 11 months of the year.
Retail sales rose to 8.0 percent in December on-year, compared with forecasts for 7.8 percent and November’s 8.0 percent. Real estate investment rose by 9.9 percent in 2019, slowing slightly from 10.2 percent in the first 11 months of the year. But growth in December slipped to a two-year low as authorities continued to clamp down on speculation to keep home price rises in check.
Beijing has been relying on a mix of fiscal and monetary steps to weather the current downturn, cutting taxes and allowing local governments to sell huge amounts of bonds to fund infrastructure projects. Banks also have been encouraged to lend more, especially to small firms, with new yuan loans hitting a record of US$2.44 trillion in 2019. The economy has been slow to respond, however, and investment growth had slid to record lows.
In 2020, the economy is expected to remain under pressure. Beijing plans to set a lower economic growth target of around 6 percent this year from last year’s 6-6.5 percent, relying on increased infrastructure spending to ward off a sharper slowdown.
Although the phase one trade deal with the US eased trade tensions and increased business optimism, existing tariffs will remain in place and further monetary easing will be needed to boost domestic demand. Chinese officials seized on the temporary truce during a press briefing.
“The initial trade agreement will give people more reason to be optimistic about the country’s economic growth,” said Ning Jizhe, China’s national statistical chief, added that the deal will help China deepen its economic relationship with the US.
Analysts have already pointed to the phase one deal — in which China agreed to buy hundreds of billions of dollars worth of products from the United States, among other terms — as something that will boost business confidence this year.
Fitch Ratings, for example, on Thursday raised its economic growth forecast for China this year to 5.9 percent from 5.7 percent.
“The signing of the phase-one trade deal is a signal that the situation is unlikely to deteriorate,” said J.P. Morgan Asset Management Global Market Strategist Chaoping Zhu.
As part of the phase one deal, China pledged to boost US imports by $200bn above 2017 levels and strengthen intellectual property rules. In exchange, the US agreed to halve some of the new tariffs it has imposed on Chinese products.
Written by Lexy Nantu, Email: firstname.lastname@example.org