China growth slows down

21 Jan 2019

China – economy growth slowest in 28 years

The economy in 2018 in China grew at its weakest annual pace in nearly three decades amidst a protracted trade war with the US. This has resulted in added pressure on Beijing to reach a deal with Washington and to increase stimulus measures in efforts to avoid a sharper slowdown.

GDP growth for China for all of 2018 was recorded at 6.6%, the slowest since 1990. Though this was in line with what analysts had expected, it was lower than the predicted 6.8% growth.

It was the fourth quarter, which grew by only 6.4%, down from 6.5% the previous quarter, after faltering domestic demand and increased U.S. tariffs is what particularly caused the drop.

China has generated approximately a third of global growth in recent years. Signs of weakness are causing anxiety about risks to the world economy and weighing on profits for various firms, including some of predominant carmakers and tech giants.

Naoto Saito, chief researcher at Daiwa Institute of Research in Tokyo, said:

“The government has means to support the economy. They can expand infrastructure spending and they can cut banks’ reserve requirement ratio. So, we don’t need to worry about capital spending.

“But the problem lies in consumption. As the U.S. and China clash on many fronts, consumer sentiment appears to have been hurt. Until now, solid wage growth has been supporting consumption but now there appears to be a sense of vague anxiety about the future.”

Capital Economics China economist Julian Evans-Pritchard commented the Chinese economy remained weak at the end of 2018 “but held up better than many feared”.

She also remarked that “China’s economy is likely to weaken further before growth stabilises in the second half of the year.”

By Lyba Nasir