Economic Growth of China Slowest Since 1990 Amid Trade War with US

In 2018 economy of China grew 6.6%, its slowest pace in almost 30 years, confirming a slowdown in the world’s second largest economy that could threaten global growth. After years of breakneck expansion, the world’s second largest economy is losing steam, official data on Monday confirmed. China’s growth in 2018 was the country’s slowest reported rate since 1990 and down from 6.8% growth in 2017.

China’s economy grew 6.4% in the fourth quarter from a year earlier, levels last seen in early 2009 at the height of the global financial crisis.

“We see that there are changes in stability, concern about these changes. The external environment is complicated and severe. The economy is facing downward pressure,” said Ning Jizhe, director of China’s National Statistic Bureau.

Monday’s data, while in line with expectations, puts pressure on Beijing to reach a deal with Washington to end the bruising trade war. “China-US conflict is indeed affecting China’s economy, that is true, but the impact is manageable,” Ning said.

The MSCI index of Asia-Pacific shares outside Japan rose 0.4% while Japan’s Nikkei gained 0.5%. China’s CSI300 index rose 0.97%.

The latest economic figures suggest China may no longer be able to help shore up weakening global growth, as it has in the past.

A government campaign to rein in risky debt has been compounded by a trade war with the US, hitting consumer and business confidence. Over the past few months consumer spending, manufacturing output, and investment have reached record lows.

So far China has held back from massive the stimulus measures used in 2009 that resulted in a binge of infrastructure projects and bad debt taken on by companies and local governments. Analysts say stimulus measures would not only undo government efforts lower risk in the financial system, such methods are not as effective anymore in spurring growth.

“The data confirm a challenging period for China’s economy, with weakness discernible across different sectors,” said Tom Rafferty, principal economist for China at the Economist Intelligence Unit.

Rafferty said stimulus measures would likely be mild and investor confidence would remain fragile as trade frictions continue. The group predicts even slower growth of 6.3% in 2019 and a further weakening in 2020.

“The first half of 2019 is likely to be equally difficult, with headline growth likely to recede further. China’s economy is unlikely to experience a rebound similar to past business cycle expansions,” he said.

Monday’s economic data also included some indications this year’s downturn may not be as severe as initially thought. The country’s industrial output rose 5.7%, while retail sales increased 8.2% in December, compared to a year earlier.

Chinese vice premier Liu He will visit the United States on 30 and 31 January for the next round of trade talks with Washington.

On Saturday United States President Donald Trump said that there has been progress toward a trade deal with China, but denied that he was considering lifting tariffs. “Things are going very well with China and with trade,” Donald Trump told reporters at the White House.