China Posts Worst Slowdown In Nearly Three Decades

China’s economy grew by 6.1 percent in 2019, the lowest growth rate in the country since 1990, according to reports on Friday (Jan. 17).

Between the two-year trade war with the U.S., rising debt and domestic challenges facing the world’s second-largest economy, the gross domestic product (GDP) pace was close to analysts’ expectations of 6.2 percent growth. 

The new data from the National Bureau of Statistics comes less than 48 hours after China and the U.S. signed a “phase one” trade deal on Wednesday (Jan. 15). The agreement still leaves tariffs on $360 billion worth of Chinese-made merchandise. 

Retail sales grew by 8.0 percent last year and aligned with market forecasts of 7.9 percent but were down from 9.0 percent in 2018. The numbers were elevated by a robust Singles Day on Nov. 11, China’s biggest shopping day of the year. 

“Right now, we are looking at the glass half full. The markets are extremely optimistic, and they are inclined to see the positive side,” Hao Zhou, a senior economist at Commerzbank, told the NYT. “We have to keep in mind that the glass is also half empty.”

Zhou estimated that economic growth will fall to 5.8 percent this year, while S&P Global predicts growth will fall to 5.7 percent.

“The trade deal takes the tail risk off the table,” Shaun Roache, chief economist at S&P Global, told the Financial Times. “This is not going to be enough to change the underlying dynamic in China.”

Infrastructure investment was weak, growing just 3.8 percent in 2019, while total grain output was up by 0.9 percent over last year. The 5.2 percent unemployment was aligned with the Chinese government’s expectations.

“We need to look beyond the official headline numbers to the significant headwinds facing the economy,” said Diana Choyleva, chief economist at Enodo Economics.In September, the central bank of China moved to help the economy by reducing the amount of cash that banks need to have as reserves for the third time in 2019. It released $126 billion — or ㍐900 billion.