China’s economy expanded at 6.6% in 2018, its slowest rate since 1990, stoking fears about the impact on the global economy, official figures released on Monday shows.
In the three months to December, the economy grew 6.4% from a year earlier, down from 6.5% in the previous quarter.
The data was in line with forecasts but underlines recent concern about weakening growth in the world’s second-biggest economy.
China’s rate of expansion has raised worries about the potential knock-on effect on the global economy. The trade war with the US has added to the gloomy outlook.
The official figures out Monday showed the weakest quarterly growth rate since the global financial crisis.
China’s economic slowdown is not news in itself. Beijing has broadcast this for several years, that it’s going to focus on the quality not quantity of growth.
But still, we should be worried.
Slower growth in China means slower growth for the rest of the world.
It accounts for one-third of global growth. Jobs, exports, commodity producing nations – we all depend on China to buy stuff from us.
Slower growth in China also means it is harder for China to address its mountain of debt, even with the Communist Party’s undoubted ability to be able to support the economy.
Growth has been easing for years, but concern over the pace of the slowdown in China has risen in recent months as companies sound the alarm over the crucial market.
Earlier this month Apple warned weakness in China would hit its sales.
Carmakers and other firms have spoken out on the impact of the trade war with the US.
China’s government has been pushing to shift away from export-led growth to depend more on domestic consumption.
Policymakers in China have stepped up efforts in recent months to support the economy.
Those measures to boost demand include speeding-up construction projects, cutting some taxes, and reducing the level of reserves banks need to hold.
Capital Economics China economist Julian Evans-Pritchard said the Chinese economy remained weak at the end of 2018 “but held up better than many feared”.
“Still, with the headwinds from cooling global growth and the lagged impact of slower credit growth set to intensify… China’s economy is likely to weaken further before growth stabilises in the second half of the year.”
Despite the slowing economy, Chinese officials also pledged to continue with a crackdown on air pollution that has weighed on the industrial sector.
Other data on Monday showed investment and retail sales continued to languish, while the jobless rate edged higher.
Fixed-asset investment rose 5.9 percent in 2018, the slowest in at least 22 years, as a regulatory crackdown on riskier financing and debt weighed on local government spending early in the year.
Property investment is also looking wobbly, with analysts waiting to see if Beijing will risk loosening restrictions on home buyers that have kept a potential housing bubble in check.
Chinese consumers are clearly feeling the pressure.
Though retail sales growth picked up marginally in December to 8.2 percent, the consumer strength gauge is around the weakest in 15 years. Auto sales in the world’s biggest car market shrank for the first time since the 1990s.
Officials recently pledged to boost consumer demand for big-ticket items from cars to appliances. But gains in disposable income are slowing, while household debt is on the rise.
Other data in recent weeks showed exports and imports unexpectedly shrank last month, while falling factory orders point to a further drop in activity in coming months and more job shedding.
Some factories in Guangdong – China’s export hub – have shut earlier than usual ahead of the long Lunar New Year holiday as new business dries up.
Even if China and the United States agree on a trade deal in current talks, which would be a tall order, analysts said it would be no panacea for China or its exporters.
Demand is weakening globally, not just in the United States. Net exports actually dragged on China’s growth by 8.6 percent last year, Reuters calculations based on official data showed.
Trade negotiators are facing an early March deadline and Washington has threatened to sharply hike tariffs if there are no substantial signs of agreement.
White House officials have given markedly different views on progress so far. China’s Vice Premier and lead negotiator Liu He is due to visit Washington for the next round of talks at the end of the month.
To free up more funds for lending, particularly to vulnerable smaller firms, the central bank has cut the amount of reserves that banks need to set aside as reserves (RRR) five times over the past year, and guided borrowing costs lower.
Further RRR reductions are expected in coming quarters, but most analysts do not see a cut in benchmark interest rates yet, as policymakers wait to see if earlier steps begin to stabilize activity.
More forceful easing could also pressure the yuan and aggravate high debt levels, with money going into less efficient or speculative investments as it often has in the past.
The government may unveil more fiscal stimulus during the annual parliament meeting in March, including bigger tax cuts and more spending on infrastructure projects.
Some analysts believe it could deliver 2 trillion yuan ($295.13 billion) worth of cuts in taxes and fees this year, and allow local governments to issue another 2 trillion yuan in special bonds largely used to fund key projects.
China has ample room for policy adjustments, statistics bureau chief Ning Jizhe said on Monday.
Still, some analysts do not expect the economy to bottom out convincingly until summer.