China’s economy expanded at the slowest pace since the global financial crisis, as a domestic financial clean-up, weakening global demand and trade conflict with the U.S. all dampened momentum.
Gross domestic product rose 6.4 percent in the fourth quarter from a year earlier, matching economists’ estimates, and compared with 6.5 percent in the previous three-month period. In December, gauges of consumption and factory output accelerated, while investment held up.
The world’s second-largest economy is on a long-term slowing trajectory as it shifts from the investment-led model of the past while carrying a heavy debt load. The government’s control of that process is being tested by the standoff with U.S. President Donald Trump over trade at a time when the global expansion is already looking shakier.
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Authorities have used an array of targeted and limited stimulus measures to try and revive optimism without resorting to massive stimulus, as they have in past downturns.
The trade conflict, debt curbs, slumping consumer confidence as well as a lack of “animal spirits” are all major headwinds the economy is facing this year, according to Stephen Chang, portfolio manager for Asia at Pacific Investment Management Co. in Hong Kong. “While the government is putting policy responses in place, we anticipate that these will need to be ramped up over the course of the year,” Chang wrote in a note ahead of the data.
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For the full year, the economy expanded 6.6 percent, in line with estimates. Although it has moderated significantly from the years of double-digit growth, China is still one of the fastest growing large economies and its larger size now means it remains the world’s growth engine.
The statistics office also said Monday:
Industrial output rose 5.7% vs 5.3% seen by economists Retail sales increased 8.2% vs 8.1% forecast Fixed-asset investment climbed 5.9% last year from 2017 vs forecast of 6% The urban monthly surveyed unemployment rate was 4.9% at end-December
So far, the government and central bank have tried to stimulate the economy without resorting to a massive credit flood and infrastructure binge like in 2009. The People’s Bank of China has been quietly guiding interbank borrowing costs down without actually cutting official interest rates, and the fiscal authorities have pressed on with tax cuts and expedited government bond sales, among other policies.
With President Xi Jinping’s top economic aide Liu He heading to the U.S. this month, the challenging economic background adds pressure to reach a deal on trade.
Due to the massive size of its market, China’s slowdown is also bringing pain to companies and industries worldwide. Auto sales in the most populous nation dropped for the first time in three decades last year, hurting prospects of not only local manufacturers but also of companies such as Volkswagen AG and Toyota Motor Corp.
Meantime, a downturn in iPhone sales in China has hurt Apple Inc.’s share price this month and raised question marks over whether the consumer can keep cushioning the economy’s rebalancing away from the old smokestack industries.
If the slowdown deepens, authorities may resort to more aggressive easing such as relaxing property purchasing curbs in the biggest cities, economists have speculated.