China Posts Lowest Economic Growth in 28 Years

23 January, 2019, 07:59 | Author: Sally Reid
  • Economic activity suffered a sharp drop in the fourth quarter of last year

The slower rate of expansion has raised concerns about the potential knock-on effect to global growth. Copper is technically in a bear market with the price plunging more than 20% since peaking in June 2018 over fears of the impact of the trade dispute between China and the US. Between the two countries that is nearly 40% of the world's GDP from just these two countries.

Apple made a surprise announcement earlier this month when it issued a downward sales revision because of lower than expected demand for its iPhones in China.

There is evidence that the slowdown may be worse than the official figures indicate. Shares rose in Shanghai and Hong Kong on Monday, Jan. 21, 2019, as China reported that its growth fell to a three-decade low of 6.6 percent in 2018.

Citigroup Inc. warned in a January 14 note that the China slowdown may "blow the global economy off course".

Monday's data also showed consumption played an increasingly bigger role in the economy, contributing 76.2 percent of GDP growth, up significantly by 18.6 percentage points from a year ago.

With President Xi Jinping's top economic aide Liu He heading to the USA this month, the challenging economic background adds pressure to reach a deal on trade.

However, the consumer strength gauge is around the weakest in 15 years.

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"Considering the deterioration of corporate profitability, the downward pressure on the real estate market, still uncertain external demand, and the decline in the growth rate of new service industries, pressure on employment in many industries this year can not be ruled out, "the CICC analysts said".

Given the continued headwinds created by the government campaign to reduce debt and risky lending in the economy, as well as the trade war with the United States, the government reportedly will set a growth target range of between 6 and 6.5 per cent for this year. In other words, new investment has less impact on the overall economy while debt levels increase.

In Ningbo, a port city also in Zhejiang, newborns fell by 16.98 per cent past year, compared to 2017. They predict the decline will bottom out this year as Beijing's stimulus efforts gain traction. A great deal of that investment has gone to waste with as many as 65 million apartments in China that are unoccupied.

Growing signs of weakness in China - which has generated almost a third of global growth in recent years - are fueling anxiety about risks to the world economy and are weighing on profits for firms ranging from Apple to big carmakers.

The World Bank report produced earlier this month warned of "storm clouds" with lower growth expected in the major economies.

Growth in the fourth quarter came in at 6.4 percent, down from 6.5 percent seen in the third quarter, NBS data showed. The figure released on Monday was in line with many economists' forecasts.

Naoto Saito, chief researcher at Daiwa Institute of Research in Tokyo, said: "The government has means to support the economy". The reason I say this is because when I visited China in 2015 and met with Chinese defence officials, they had told me that China was looking to take advantage of strategic opportunities that the global scenario affords.

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