China’s economy grew by 6.6 per cent in 2018. This is the slowest pace ever experienced in 28 years, attributed to a weakening momentum in the fourth quarter due to US trade war and a ballooning debt pile.
The 2.9 per cent drop in growth by the Asian giant compared to 2017 is still slightly above the official projection of 6.5 percent, based on the National Bureau of Statistics (NBS). The growth matches the forecast by analysts polled by Agence France Presse (AFP).
Economists and market pundits are predicting a further deceleration of China’s economy after achieving only 6.4 per cent growth in the fourth quarter, 2018, a low similar to the one seen in the global financial crisis 10 years ago. The China economist, Lu Ting at Nomura reinforced that fourth quarter GDP growth was expected to plunge, warning “But the worst is yet to come.”
The direction of the global economy which China relies on for trade to grow its economy remains tense as the largest economies like the US take a protectionist approach, especially under President Donald Trump.
“For the world’s second-largest economy, where trade accounts for one-third of GDP, this has an impact,” said, NBS commissioner Ning Jizhe , adding “downward pressure” on the economy has increased.
“Everyone is widely concerned about the direction of the international situation where there are many variables and uncertain factors,” added Ning Jizhe, noting trade protectionism is in vogue.
With slowing growth China’s Premier Li Keqiang, who is also an economist by trade came out to give an assurance that the government is in control of the economy and would not allow it to slip away.
The US trade war dealt China a blow, affecting nearly half of its imports due to the new tariffs President Donald Trump introduced to push Beijing into trade concessions.
Currently, the trade row is temporarily suspended until March this year, after President Xi Jinping and his counterpart Trump brokered a truce at the 2018 G20 summit in Buenos Aires, Argentina.
“China-US economic and trade frictions do indeed affect the economy, but the impact is generally controllable,” stated NBS commissioner Ning Jizhe.
In 2018, in effect, China halted its mega projects like subway lines and motorways to keep a lid on debt, with infrastructure investment rising by just 3.8 percent, down from 19 per cent of 2017.
Its exports to the US slumped in December, signifying the need of China to rely on domestic consumers to stimulate the economy.
“The slowdown in credit growth is causing economic momentum to falter,” mentioned Mark Williams, chief Asia economist at Capital Economics, in a note last week.