As per the latest figures out of Beijing, the last quarter of 2019 gave China GDP growth of 6.0%. This matched quarter-three results but is lower than the GDP growth rates of the first and second quarters. Looking at 2019 as a whole, China’s GDP has risen by 6.1 percent year-on-year. In 2018, China’s economy grew by 6.6%, and in 2017 by 6.9%.
Between 1979 and 2010 China achieved average GDP growth of 9.91%. It experienced a record high of 36.41% in 1994 but also a low of 6.25% GDP growth in 1999. China’s nominal GDP has surpassed that of France, Italy, the UK, Germany, and Japan, over the last two decades achieving the status of the world’s second-largest economy.
China’s GDP growth still outpaces that of other major economies
Though the headline of the slowest growth for about 30 years might be striking it’s useful to note that GDP growth for the US in 2019 is expected to be 2.2%. For the UK, GDP growth will be less than 1% in 2019, and for Germany it is 0.6%.
China’s GDP growth is contracting due in part to US-China trade tensions but also due to weakening domestic demand. China’s government has been introducing measures to counteract the falling growth rate and is expected to further try to stimulate China’s economy. Beijing has introduced tax cuts, allowed local governments to sell bonds to fund infrastructure development. China’s banks have been encouraged to increase lending to smaller companies. As per the BBC, loans in yuan reached a record high of $2.44 trillion in 2019.
With the prospect of resolution to the US-China trade war, and the signing of the “phase-one” US-China trade deal reporting indicates growing manufacturer and business confidence in China. However, investment growth in the country is at record lows.
The US-China trade war may have benefited China
The BBC’s China correspondent Stephen McDonell, in a recent analysis says, “for many countries, having the slowest GDP growth in three decades might cause panic – but not in China.” He argues that the trade war “may have helped,” the Chinese economy and that China has been, “trying to gradually step down,” growth expectations. He adds, “they’re trying to break away from the years of unsustainable breakneck growth which has trashed the natural environment and led to an explosion in unserviceable debt.”
Recent trade figures for China indicate that the country’s exports increased by as much as 17% at the end of 2019. Analyst Christopher Balding argues that based on the year-on-year calculation, “December seems to be somewhat of an outlier,” and that really, “China suffered a down year with no growth in trade levels and declining imports in 2019.” However, Balding adds that “we could possibly be seeing some evidence of both green shoots and covering up existing problems.”
Agricultural, soybean and iron ore imports are all up 38%, 53% and 35% respectively in December following a trend set in November 2019. Balding says it could be “trade deal-related,” or something more “mundane.” He does find it interesting that iron ore imports are increasing, potentially a sign of manufacturing activity. Balding concludes that there is “little evidence” of a reversal of Chinese trade levels and economic activity. But November and December’s indications “do give a little basis for hope.”
December also saw 8% growth in retail sales in China and 6.9% growth in industrial output, this latter 1% above analysts estimates.
2020 GDP forecasts for China
Oxford Economics has revised its 2020 GDP forecast for China up from 5.7% to 6% as a result of the first-stage trade deal with the US. The World Bank has predicted 5.9% growth for 2020 and the IMF 5.8%. China’s largest power company, known for its “bold economic forecasts,” warned GDP growth in China could fall to as low as 4% over the next half-decade, as per Financial Times sources.
The Economist Intelligence Unit’s principal China economist, Tom Rafferty, expects China’s GDP growth in 2020 to “hold around 6%,” with stimulus from Beijing. He adds, “while businesses and investors can afford to breath a sign of relief, after a difficult 2019, we still see risks to the China outlook as mainly weighted to the downside, given the fragile nature of the trade truce and the risks that still stalk China’s financial markets.”