China’s economy slows to the weakest pace since 2009 - Hindustan Times
close_game
close_game

China’s economy slows to the weakest pace since 2009

Bloomberg | ByXiaoqing Pi
Jan 21, 2019 01:20 PM IST

With President Xi Jinping’s top economic aide Liu He heading to the US this month, the challenging economic background adds pressure to reach a deal on trade. Due to the massive size of its market, China’s slowdown is also bringing pain to companies and industries worldwide.

China notched its slowest expansion since the 2009 financial crisis last quarter amid a debt cleanup and trade woes, while signs of stabilization in December suggest government efforts to cushion the deceleration are beginning to take hold.

China notched its slowest expansion since the 2009 financial crisis last quarter amid a debt cleanup and trade woes(Bloomberg Photo)
China notched its slowest expansion since the 2009 financial crisis last quarter amid a debt cleanup and trade woes(Bloomberg Photo)

Gross domestic product rose 6.4 percent in the fourth quarter from a year earlier compared with 6.5 percent in the previous three-month period. In December, gauges of consumption and factory output accelerated, while investment held up.

Hindustan Times - your fastest source for breaking news! Read now.

The world’s second-largest economy is on a long-term slowing trajectory as it shifts from the investment-led model of the past while carrying a heavy debt load. The government’s response with targeted stimulus measures is being tested by the standoff with US president Donald Trump over trade at a time when the global expansion is already looking shakier.

“Growth will improve from the second quarter onwards,” said Morgan Stanley’s Chief China Economist Robin Xing in an interview with Bloomberg Television in Hong Kong. “The greater the downward pressure on growth, the stronger the policy response will be.”

The data contributed to a continued rally in Asian stocks. Shares in Tokyo, Hong Kong and Sydney climbed after the S&P 500 Index hit its highest since early December on Friday.

For the full year, the economy expanded 6.6 percent, the slowest pace since 1990 and in line with estimates. Although it has moderated significantly from the years of double-digit growth, China is still one of the fastest growing large economies and its larger size now means it remains the world’s growth engine.

The statistics office also said Monday:

A breakdown of the data indicate modest signs that government stimulus may be working, albeit slowly. Investment in infrastructure continued its pickup from a nadir reached in September. Industrial output data signal stronger activity in construction, with glass and cement output both accelerating.

The retail sales breakdown also went some way to counter fears of a slump in consumer confidence, showing that the decline in auto sales far outpaces any weakening in other items. Sales of household electronics, furniture, clothing and food all accelerated.

“More crucial than the GDP figure for me was that retail sales didn’t see any further deterioration,” said James Laurenceson, deputy director of the Australia-China Relations Institute at the University of Technology in Sydney. “As long as services and retail sales are holding up, generally speaking China can get by. But if those remaining drivers of growth start to tank, then the trouble becomes very significant indeed.”

Targeted Support

So far, the government and central bank have tried to stimulate the economy without resorting to a massive credit flood and infrastructure binge like in 2009. The People’s Bank of China has been quietly guiding interbank borrowing costs down without actually cutting official interest rates, and the fiscal authorities have pressed on with tax cuts and expedited government bond sales, among other policies.

With President Xi Jinping’s top economic aide Liu He heading to the US this month, the challenging economic background adds pressure to reach a deal on trade. According to people close to the discussions, the two sides have so far made little progress on the issue any deal Trump strikes with China may ultimately be judged on: ending what the US has dubbed as decades of state-coordinated Chinese theft of American intellectual property.

Due to the massive size of its market, China’s slowdown is also bringing pain to companies and industries worldwide. Auto sales in the most populous nation dropped for the first time in three decades last year, hurting prospects of not only local manufacturers but also of companies such as Volkswagen AG and Toyota Motor Corp.

Meantime, a downturn in iPhone sales in China has hurt Apple Inc.’s share price this month and raised question marks over whether the consumer can keep cushioning the economy’s re-balancing away from the old smokestack industries.

If the slowdown deepens, authorities may resort to more aggressive easing such as relaxing property purchasing curbs in the biggest cities, economists have speculated. Following the data, analysts were split over how much confidence the most recent numbers inspire, though most agreed the government will react if data worsen.

‘There will be more stimulus, more monetary easing, more infrastructure investment, which will support the jobs in the manufacturing sector even if the business activities are low,” said Iris Pang, an analyst at ING Bank N.V. in Hong Kong.

Unlock a world of Benefits with HT! From insightful newsletters to real-time news alerts and a personalized news feed – it's all here, just a click away!- Login Now!
Stay informed on Business News along with Gold Rates Today, India News and other related updates on Hindustan Times Website and APPs
SHARE THIS ARTICLE ON
Share this article
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Friday, March 29, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On