China’s economy grew 6.6% in 2018, 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, official data on Monday confirmed that China’s growth in 2018 was the country’s slowest reported rate since 1990 and down from 6.8% in 2017.
The 6.4% growth rate in the fourth quarter of 2018 was 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, adding that China’s economy remained “steady overall”.
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.
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 deploying 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 to lower risk in the financial system, but are no longer effective in spurring growth.
“The data confirms 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.
Most economists doubt China’s official GDP figures, with some estimating that the real figure could be less than half the rate reported by the government. China’s latest data comes at a time when international attention is focused on the Chinese economy.
“China’s official GDP number is always a fiction, but fourth quarter data was a particularly aggressive fiction,” said Leland Miller, chief executive officer of China Beige Book.
The Chinese vice premier, Liu He, will visit the United States on 30 and 31 January for the next round of trade talks with Washington. The vice president, Wang Qishan, is attending the World Economic Forum in Davos later this month.
“A decision was clearly made to avoid any possible suggestion that China’s slowdown isn’t firmly under Beijing’s control,” Miller said.
Monday’s economic data included some indications the 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.
The country’s traditional economic drivers, infrastructure, real estate and exports, grew marginally last year, yet other areas such as advanced technology and services expanded.
“China’s economy still expanded a lot in absolute terms, and the economy is now almost 3.5 times the size it was a decade ago,” said Scott Kennedy, a trade expert focused on China at the Center for Strategic and International Studies in Washington.
The US president, Donald Trump, said on Saturday there had been progress toward a trade deal with China, but denied reports that he was considering lifting tariffs.
“Things are going very well with China and with trade,” he told reporters at the White House.