China's economic growth slowest since 1990 amid trade war with US

Daniel Fowler
January 22, 2019

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China's economy in 2018 grew at its weakest annual pace in almost three decades amidst a protracted trade war with the USA, putting pressure on Beijing to reach a deal with Washington and to amp up stimulus measures in efforts to avert a sharper slowdown.

China's economy expanded by 6.6 percent previous year, according to official data.

Beijing has also said it will pass other measures to stimulate growth, including cutting taxes and making it easier for banks to lend.

China's ruling Communist Party is trying to steer China to slower, more self-sustaining growth based on consumer spending instead of trade and investment.

Still, Ning insisted China can resist shocks, saying "the long-term trend of stability will not change".

The fourth quarter growth rate of 6.4 per cent compared to the previous year matched that of the first quarter of 2009, the lowest growth rate since the Chinese government began publishing quarterly growth rates at the beginning of 1992.

Shares closed moderately higher in Shanghai, Hong Kong and Shenzhen on Monday as a report of weaker economic growth in 2018 raised hopes for more government stimulus. Analysts had expected 1.5 percent.

Production of plastics, metals and specialized industrial machinery accelerated, "suggesting warming expectations for a pick-up in investment", Chaoping Zhu of J.P. Morgan Asset Management said in a report.

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The trade dispute with the proving costly. Last year, US President Donald Trump imposed tariff hikes of up to 25 per cent on United States dollars 250 billion of Chinese goods. But they contracted in December as the penalties began to depress US demand.

The two sides have imposed tariff hikes of up to 25 percent on tens of billions of dollars of each other's goods in the fight over USA complaints that Beijing steals or pressures companies to hand over technology.

"The slowdown in credit growth is causing economic momentum to falter", said Mark Williams, chief Asia economist at Capital Economics, in a note last week.

The official noted that trade and economic differences between China and the United States began to manifest themselves in the second quarter of a year ago, and the Chinese government took a number of measures to ensure the stability of employment, financial sector, foreign trade, foreign capital and investment. That is if you believe the official statistics, which few economists do.

Relations with top trading partner the U.S. deteriorated sharply past year after President Donald Trump hit roughly half of Chinese imports with new tariffs in an attempt to force trade concessions.

"Considering the deterioration of corporate profitability, the downward pressure on the real estate market, still uncertain external demand, and the decline in the growth rate of new service industries, pressure on employment in many industries this year can not be ruled out, "the CICC analysts said". However, they have pushed back the time frame for that due to weakening exports.

"The details show that the infrastructure investment is shaping up to be the engine for 2019".

"China's labour participation rate is not considered low worldwide, more than 700 million of our 900 million people (of working age) are employed, and there is still room (for growth)", he said.

China has accounted for a third of global annual growth over the past decade too, and the world has relied on the country to pull the broader economy out of recession.

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