China’s GDP slows down in 2018

Growth slows as trade wars start to take a toll

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China released its official economic growth report on Monday with data showing that for the year 2018, the world’s second-largest economy advanced at a pace of 6.6% on an annualized basis. This represents the slowest growth rate registered by China since 1990.

Investors highly anticipated the data released by the National Statistics Bureau amid the ongoing trade scuffle with the United States. China’s growth sees the negatives due to the higher tariffs imposed by the Trump administration.

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The median estimates for the GDP showed that economists expected a growth rate of 6.6%. This follows the 2017 GDP growth rate which saw the world’s second-largest economy advancing at a pace of 6.8% that year.

For the fourth quarter, China’s GDP rose 6.4% in the three months ending December. This mirrored the estimates, but the data showed a slower pace of expansion compared to the 6.5% year over year growth rate seen during the third quarter of the year.

Despite the data coming out slightly off, there were some positive developments in the data, according to Chinese officials.

Industrial output increases 

China’s industrial output figures showed an expansion of 5.7% in the month of December on a year over year basis. This bested the median estimates of a 5.3% increase and the data outperformed the November figures of a 5.4% increase.

Retail sales numbers advanced 8.2% in December on the year, which matched the median forecasts. Retail sales came out slightly higher from November’s reading of 8.1%.

The data showed that while the economy decelerated, there was still some momentum especially from the export sector. China’s exporters pushed goods ahead of further tariffs from Washington.

China’s economy should get some support from the consumption tax cuts this year. However, this is unlikely to help revive the economy.

China’s GDP figures have become bell weather for the status of the world economy. The economy posted a stable growth rate over the past few years. The Beijing administration targeted a growth rate of 6.4% – 6.8% for the year 2018.

The latest GDP figures also showed that the economy was continuing to shift to a services-based sector, with this sector showing increased activity during the reported quarter.

Investors are more vigilant with China

After releasing the figures, an official from the statistics agency said that China’s trade dispute with the United States had no doubt affected the economy. However, they affirmed that there is no serious impact at the moment.

China’s economy slowed down over the past few years but the pace of growth stabilized. Domestic demand remained one of the key factors that helped to maintain the stability of the GDP growth.

This was happening even before the trade tensions with the U.S. escalated. The Chinese administration is trying to find a balance between high debt levels and maintaining economic growth. Recent data showed that producer prices were slowing at a steady pace. It was the same case with inflation as well.

Investors will continue to keep an eye on the data from China for any potential damage that might come due to the trade wars. Both nations go through negotiations, which started in January.

The Washington administration announced a 90-day truce to allow both parties to negotiate a trade deal. While there were initial reports about registered no progress, the latest development has been that China conceded.

News reports indicate that China was offering a six-year deal to boost its imports from the United States. This is expected to bring down China’s trade deficit with the United States. According to the reports, China has offered to buy more goods from the U.S. through 2024.

A top official from China is expected to visit Washington at the end of the month to continue with the proposals.


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