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China's economic growth slows to 6.1% in 2019, near 30-year low.


Date: 18-01-2020
Subject: China's economic growth slows to 6.1% in 2019, near 30-year low
China's economy grew 6.0 percent in the fourth quarter of 2019 from a year earlier, official data showed on January 17, in line with expectations and steadying from the previous quarter's pace.

The growth rate continued to hover at the weakest in nearly three decades.

The world's second-largest economy grew an annual 6.1 percent in 2019, the slowest in 29 years but still within the government's target of 6-6.5 percent. Analysts had expected it to expand 6.1 percent  in 2019, down from 6.6 percent in 2018.

Facing sluggish demand at home and abroad and escalating US trade pressure, Chinese policymakers have been rolling out a stream of growth boosting measures over the past two years, while trying to contain financial and debt risks.

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The economy has been slow to respond to support measures, but November and December pointed to improvements, particularly in the manufacturing sector and possibly linked to easing US-China trade tensions.

KEY POINTS

- Q4 GDP +6.0 percent y/y (forecast +6.0 percent, 2018 +6.0 percent)

- Q4 GDP +1.5 percent q/q (forecast +1.5 percent, prev +1.5 percent)

- December industrial output +6.9% y/y (forecast +5.9 percent, prev+6.2 percent)

- December retail sales +8.0 percent y/y (forecast +7.8 percent, prev+8.0 percent)

- Jan-December fixed asset investment +5.4 percent y/y (forecast+5.2 percent, Jan-Nov +5.2 percent)


- Jan-December property investment +9.9 percent y/y (Jan-Nov 10.2 percent)

COMMENTARY:

SHUANG DING, HEAD OF CHINA ECONOMIC RESEARCH AT STANDARD CHARTERED, HONG KONG

"The most important story here is that growth did not fall below 6 percent. Growth in 2020 is most likely to be stabilised given the lagged impact of the previous policy and forward-looking data, including credit (total social financing) data yesterday, and the government's emphasis on supporting the economy, including local bond issuance to support infrastructure.

"Monetary policy will still be supportive of fiscal stimulus in 2020. We expect two more RRR cuts, 50 basis points each this year, and they will also likely cut MLF moderately by 20 basis points in the first half of the year."

LOUIS KUIJS, HEAD OF ASIA ECONOMICS AT OXFORD ECONOMICS, HONG KONG

"I think it (stabilisation of growth) is sustainable. We have seen efforts (from policymakers) to make sure economy continues to grow. The risks to China are still largely on the external side. We cannot rule out things happening in Washington. We also cannot rule out bumps in the road for the global economy.

"We still think China is in for slowdown later on, it's in the midst of a structural slowdown. We have stabilisation 2020, but after 2020 we do think there will be more structural slowdown."

BACKGROUND:

- China's economic growth has been slowing amid weak domestic and export demand, with pressure compounded by an escalating trade war with the United States. A government crackdown on debt and riskier types of financing in recent years has also led to a softening in investment.

- Authorities have rolled out a stream of stimulus measures including tax cuts, higher infrastructure spending and liquidity injections by the central bank, but domestic demand has been slow to respond.

- Washington and Beijing signed a Phase 1 trade deal on Jan 15, declaring a ceasefire in the trade row, but the United States will maintain most of the tariffs on Chinese imports which it imposed during the dispute.

- Economic growth is expected to slow further to 5.9 percent in 2020, a Reuters poll showed, reinforcing views that Beijing will need to roll out more policy support measures.

- The central bank is expected to cut banks' reserve requirement ratios (RRR) by another 100 basis points (bps) by the end of 2020, on top of a 50 bps cut announced this month, which was the eighth since early 2018.

- China is also expected to cut its one-year loan prime rate (LPR), its new benchmark lending rate, by a total of 25 bps this year.

- Top officials have repeatedly vowed not to unleash massive "flood-like" stimulus like that announced in past economic downturns, which left a mountain of debt. Corporate bond defaults hit a fresh record high last year, while state-linked firms rescued several troubled smaller banks.

Source: moneycontrol.com

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