China's economy cools in Q4, 2018 growth at 28-year low
BEIJING, Jan 21 (Reuters) - China's economic growth cooled
slightly in the fourth quarter from a year earlier as expected,
weighed down by weak investment and faltering consumer
confidence as Washington piled on trade pressure, leaving 2018
growth the weakest in 28 years.
* Q4 GDP +6.4 pct y/y (f'cast +6.4 pct, prev +6.5 pct)
* Q4 GDP +1.5 pct q/q (f'cast +1.5 pct, prev +1.6 pct)
* 2018 GDP +6.6 pct vs 2017's +6.8 percent
* Dec industrial output +5.7 pct y/y (f'cast +5.3, Nov +5.4)
* Dec retail sales +8.2 pct y/y (f'cast +8.2, Nov +8.1)
* Jan-Dec fixed asset investment +5.9 pct y/y (f'cast +6.0,
Jan-Nov +5.9 pct)
* Dec property investment +8.2 pct y/y vs +9.3 pct in Nov -
Asian markets kept their nerve while China's stock market
held steady after the data. The Australian dollar, seen
as a liquid proxy for China demand, also held largely steady.
LARRY HU, AN ECONOMIST AT MACQUARIE CAPITAL, HONG KONG
"There are three key drivers of the Chinese economy:
infrastructure, property and exports. We see that infrastructure
is rebounding, but property and exports are slowing down.
"We expect an escalation of stimulus in infrastructure and
property in the second half."
RAYMOND YEUNG, CHIEF ECONOMIST, GREATER CHINA, ANZ
"I believe they want to see an aggressive target (above 6.5
percent) as they celebrate the 70th anniversary (of the
establishment of the PRC)"
"China can't rely on exports or a very difficult
manufacturing sector, but we see an upside in infrastructure.
The government will approve a lot more projects in the pipeline.
2019 will be more of a domestic story, especially on the
JULIAN EVANS-PRITCHARD, SENIOR CHINA ECONOMIST, CAPITAL
"The latest data suggest that economic growth remained weak
at the end of 2018 but held up better than many feared, in part
thanks to a policy-driven recovery in infrastructure spending.
Still, with the headwinds from cooling global growth and the
lagged impact of slower credit growth set to intensify in the
coming months, China's economy is likely to weaken further
before growth stabilises in the second half of the year on the
back of expanded policy stimulus.
MASAAKI KANNO, CHIEF ECONOMIST, SONY FINANCIAL HOLDINGS,
"There was no surprise from the GDP data but the basic
message is that the Chinese economy is still slowing down.
"The renminbi appears to have stabilised. It shows that the
investors do not seem to have a big concern in the near-term
outlook of the Chinese economy (and are) probably expecting some
positive impact from policy measures.
"Today's retail sales are slightly higher than expected. We
hope the uptrend should be sustained, but we don't know what
will happen to consumer sentiment in China. It probably depends
on the result of the U.S.-China negotiation on trade. We hope
the negotiation should end up with some more positive impact on
"Today's industrial production is a slightly positive number
but the manufacturing sector still appears to have a downside
risk in the first quarter.
"The Chinese government's announcement...that is, to focus
on stimulating the economy, appears to be focusing on the tax
cut to stimulate the consumption.
"It takes time (to take effect) compared to previous
measures that were taken in the form of the increase in more
direct spending on infrastructure.
"We still think the Chinese economy could bottom out in the
middle of the year."
TORU NISHIHAMA, CHIEF ECONOMIST, DAI-ICHI LIFE RESEARCH
"China's GDP headline was within expectation. But its
industrial production was unexpectedly firm, which was probably
due to infrastructure investments.
"The Chinese economy lacks momentum. Impact from U.S.-China
trade tensions are appearing and its adverse impact will
continue. In addition to that, uncertainties over the global
economy are increasing.
"The focus will be how China's domestic demand will offset
worsening external demand. It will be a close watch how the
government's measures, such as subsidies and infrastructure
investment, will support domestic demand."
HUNTER CHAN, ECONOMIST, GREATER CHINA, STANDARD CHARTERED
"The GDP data was on expected lines...main drag was from the
"We expect further stimulus from the fiscal side in
2019...focus would continue to remain on reducing the tax burden
and easing conditions for SMEs.
"The domestic labour market remains stable...this will
likely support domestic demand and consumption going forward.
"We see the yuan appreciating to 6.65 in 2019."
RAJIV BISWAS, ASIA-PACIFIC CHIEF ECONOMIST, IHS MARKIT,
ON MARKET IMPACT:
"One positive factor in terms of the outlook for the yuan
and the equities market looking at 2019 is that the Chinese
government is now taking a lot of stimulus measures to support
growth. The reserve requirement ratio cuts have already been
implemented and more will follow, and a ramping up of public
expenditure on infrastructure and the impact of tax cuts will
also help the economy.
"We do expect growth to be relatively strong this year at
around 6.3 percent. That should support stability of the yuan
and also help to underpin the stock market. The big risk to all
of that is what will happen with the U.S.-China trade war. If
there is no deal and if the trade measures escalate, then this
would be a negative for the currency, the growth outlook and the
equity market. A lot will hinge on what happens in the
U.S.-China trade war, and if a deal can be concluded in the
first half of this year."
NAOTO SAITO, CHIEF RESEARCHER, DAIWA INSTITUTE OF RESEARCH,
"The data shows the economy is steadily slowing down,
although we had thought we could have seen a bigger slowdown.
"It is hit by three factors, a slowdown in the global
economy, including Chine's own, due to rising U.S. interest
rates, the U.S-China trade war and weak demand for mobile
phones, which accounts for about 70 percent of the fall in
China's exports in December."
"The government has means to support the economy. They can
expand infrastructure spending and they can cut banks' reserve
requirement ratio. So we don't need to worry about capital
"But the problem lies in consumption. As the U.S. and China
clash on many fronts, consumer sentiment appears to have been
hurt. Until now, solid wage growth has been supporting
consumption but now there appears to be a sense of vague anxiety
about the future."
STEVE COCHRANE, CHIEF APAC ECONOMIST, MOODY'S ANALYTICS
"It's pretty clear that the government will try to use as
much selective stimulus to keep the economy on a good track.
They could easily reduce the RRR again. It is still not down to
where it was back during the financial crisis. That, plus some
tax cuts. The difficulty will be trying to ramp up consumer
spending and that's because of the high debt load consumers are
in right now. The corporate debt load is high as well. Local
governments are strapped with debt. So it's not the question of
if government being able to provide for the stimulus but really
the effectiveness of it."
JEFF NG, CHIEF ECONOMIST ASIA, CONTINUUM ECONOMICS
"The data continues to reflect a slowdown in China that is
caused by both domestic and external weakness. Some positives to
take away are that IP and retail sales beat expectations in
December. That highlights some degree of resilience in the
economy and shows that some of the targeted stimulus measures
are helping a little to support the economy.
"The trade war didn't directly impact on the growth figures
so much because growth is mostly domestically supported. But its
impact on both consumer and investor confidence was much
SHANE OLIVER, CHIEF ECONOMIST, AMP CAPITAL, SYDNEY
"No real surprises there. The GDP number is down a little
bit but that has been expected. It's consistent with the
commentary around a slowdown in Chinese growth.
"The IP and retail data point to some stabilisation in
growth towards the end of last year. Overall they are not bad
numbers although there will be some debate about how reliable
these numbers are.
"We are expecting a slowdown in Q1 led by exports, although
for the year as a whole we are seeing 6.2 percent.
"As far as policy response is concerned, I don't think we
are likely to see the kind of stimulus we saw in 2015/16."
CHRISTY TAN, ASIA HEAD OF MARKETS STRATEGY RESEARCH,
NATIONAL AUSTRALIA BANK, SINGAPORE
"The headline on its own is not much of a surprise for
markets. If you look at some of the positive spin for this data
– the December IP and retail sales – came in better than
expected. If we look at the breakdown of the commodity output,
they seem to have grown at or above average levels for December.
That may help remove or reduce some of the concerns of a growth
slowdown becoming more entrenched this year.
"The unemployment number in the data has edged up and we
should not ignore that. That number edging up is not good.
"There will be more stimulus, they have already announced
some of the plans which are in approval stage and will be
carried out over the course of the year. It's still not time to
relax on that front and we will see more effort on stimulus this
- An escalating trade war between Beijing and Washington has
heaped more pressure on China's already cooling economy, adding
to fears of slower global growth and weaker corporate profits
- Washington and Beijing have agreed to a 90-day truce in a
trade war that has disrupted the flow of hundreds of billions of
dollars of goods.
- If solid progress towards a deal is not reached by a
deadline of early March, Washington has threatened to sharply
hike tariffs on Chinese goods. But a comprehensive agreement to
end the dispute is seen as unlikely by the negotiating deadline,
given the number of highly divisive and politically sensitive
issues on the table.
- Even if a durable trade deal is reached dismantling
current tariffs, analysts say it would be no panacea for China's
ailing economy, which is being weighed down by weak investment
and faltering consumer confidence.
- Beijing has been stepping up policy support to avert a
sharper slowdown but top officials have vowed not to resort to
massive stimulus as in the past, which left a mountain of debt.
- The People's Bank of China (PBOC) has cut banks' reserve
requirement ratio (RRR) five times in a year, with further
reductions expected. It has also been guiding market interest
rates lower but a cut in benchmark rates may not happen soon.
- The government is putting a greater emphasis on fiscal
policy measures to cushion the downturn, with deeper tax cuts
and more infrastructure spending expected this year.
- Investment growth has inched higher in the last few months
as regulators fast-track infrastructure projects but it is still
not far from record lows, while retail sales growth is the
weakest since 2003 and the property sector looks wobbly.
- Corporate sales and profits are weakening, discouraging
fresh investment and raising the risk of higher job losses.
- While some economists say China may be facing a
significant slowdown, no one is expecting a crash at this point.
Still, policy support measures will take some time to kick in,
and the world's second-largest economy is not expected to
convincingly stabilise until summer.
(Reporting by Hong Kong and Singapore newsrooms and Asia
bureaux; Editing by Jacqueline Wong)
First Published: 2019-01-21 04:06:34
Updated 2019-01-21 05:38:57
© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.