President Xi Jinping - Photo by The State Council The People's of Republic China

JAKARTA (TheInsiderStories) – China‘ GDP grew 6.6 percent in 2018, down 0.2 percentage point from 2017, in line with the IHS Markit forecast, said the research company today (01/21). The deceleration was across agricultural, industrial and services sectors.

Fourth quarter GDP growth was 6.4 percent in annual basis (y/y), the lowest since the second quarter of 2009. The deceleration in the quarter was largely driven by slower growth in the services sector, which fell 0.5 percentage point quarter on quarter (q/q).

Industrial value-added output growth improved from 5.4 percent y/y in November to 5.7 percent y/y in December. Faster growth in mining sector was the main driver behind the acceleration. While, infrastructure investment growth accelerated on fiscal stimulus, while real estate investment growth continued to weaken.

China‘s retail sales growth improved in December mainly as a result of slower contraction in auto sales. Nominal retail sales grew 8.2 percent in December, up 0.1 percentage point from November. Auto sales, which accounted for about 30 percent of total retail sales, declined at a slower rate of 8.5 percent in December versus a decrease of 12.5 percent in November.

According to Yanjun Lin, senior economist at IHS Markit, the Chinese economy is expected to face continuing downward pressure in the first quarter 2019, and the government is expected to implement more fiscal and monetary stimulus measures to support economic growth.

Higher tariffs imposed by the United States will further dampen export growth in the first quarter. Furthermore, he said, manufacturing investment growth may soften in the coming months as a result of falling industrial profits.

Although local governments have accelerated local government bond issuance to finance infrastructure projects, infrastructure investment growth is unlikely to see a large rebound because tight restrictions on local government debt remain in place.

Some local authorities will relax curbs on the property markets to boost real estate investment.

The central bank is expected to further cut required reserve ratio this year to ease liquidity conditions. In addition, the central government will also implement more tax cuts to reduce the costs of small and medium sized enterprises and improve business sentiment.

Written by Staff Editor, Email: theinsiderstories@gmail.com

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