Economists expect China’s official GDP growth to slow to as low as 6 per cent this year, although many argue the official figures were not to be trusted and true growth could be as low as 4 per cent. Officials from the country’s National Bureau of Statistics acknowledged the risks on Monday.
“The external environment is complicated and severe, the economy still faces downward pressure,” Ning Jizhe, the statistics bureau head, told reporters, noting that China contributed 30 per cent to global economic growth last year. He also flagged more macro policy support measures to support growth.
The International Monetary Fund (IMF) warned in its latest World Economic Outlook update that China’s slowdown was a big risk to the global economy and would hit commodity-producing nations such as Australia particularly hard. The IMF has downgraded global growth forecasts for 2019 and 2020 for the second time in three months.
‘No sign of a hard landing’
China’s full-year GDP data released on Monday showed China’s economy grew by 6.6 per cent for the year, a slowdown from the previous year’s growth but in line with forecasts. While China’s previously reported GDP growth for 2017 was 6.9 per cent, Beijing last week revised this figure down to 6.8 per cent.
China’s economy slowed to its lowest rate of growth since the global financial crisis in the fourth quarter. AP
The annual growth rate for the fourth quarter GDP was 6.4 per cent, its slowest rate of growth since 2009. This compared to growth of 6.5 per cent in the third quarter and was in line with economists’ expectations.
But investors liked slightly stronger-than expected retail sales growth of 8.2 per cent for the year, with data showing the growth of consumption in rural areas outstripped urban areas. Industrial production for December increased 5.7 per cent, and up 6.2 per cent for the year. Beijing is particularly concerned about containing unemployment follow reports of major factory closures. The unemployment rate increased in December to 4.9 per cent from 4.8 per cent in November.
“Following a consistent pattern of the last decade, the year-on-year growth rates of almost every aspect of the economy slowed a bit, but there is no sign of a hard landing,” Andy Rothman, investment strategist at Matthews Asia, said.
Mr Rothman said consumption remained healthy with inflation-adjusted income growth slowing to 6.2 per cent from 6.9 per cent in the previous quarter. The nominal growth rate of retail sales of consumer goods did slow sharply, to 2.6 per cent, but this was mainly due to the collapse in auto sales after the government lifted subsidies.
In Australia, the market reaction was relatively muted for the Australian dollar and also in the equity market. In China, the Shanghai Composite Index rose 0.7 per cent in early afternoon trade. Hong Kong’s Hang Seng Index was trading 0.3 per cent higher.
The release of China’s annual economic data was more closely watched by investors in Australia and around the world than usual. Concerns about China’s slowing economy and trade tensions with the United States have rattled global markets.
Crude steel production rose 6.6 per cent in 2018.
The growth met the Chinese government’s official target of 6.5 per cent. Beijing is expected to lower this target for the current year but will not release forecasts until March. The Chinese government is expected to announce further stimulus measures, such as tax cuts, to offset the slowdown. Meanwhile, expectations are growing that Beijing and Washington can negotiate a truce in their trade stand-off.
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