See More on Facebook

Economics

Chinese economy grows at slowest rate in decades

Growth slumps to 27-year low in China, with talk of more aggressive stimulus measures.


Written by

Updated: July 16, 2019

China’s economy grew 6.2 per cent in the second quarter of this year, its slowest rate in 27 years, as the country’s trade war with the United States exacted its toll.

Analysts said they expect economic growth to continue to weaken for the rest of this year, which would likely prompt more aggressive stimulus measures from Beijing.

Data released on Monday (July 15) by the National Bureau of Statistics (NBS) showed that gross domestic product growth in the second quarter had slowed from 6.4 per cent in the first quarter of this year, coming in largely within expectations.

The economy grew by 6.3 per cent for the first half of the year, according to the NBS. The figure is still within the 6 to 6.5 per cent target that Beijing has set for full year GDP growth.

Last year, China’s economy grew by a reported 6.6 per cent.

Economists are closely watching the performance of the world’s second largest economy as the trade war continues, dragging down other economies, including Singapore, whose second quarter economic growth has slumped to 0.1 per cent.

Speaking at a briefing on Monday (Jul 15), NBS spokesman Mao Shengyong said despite the slowdown, China’s economy performed within a “reasonable range”.

“Global growth is slowing, the external environment is more complicated than in the past. We are focusing our energy on restructuring and upgrading industries,” he said, when asked about what impact the trade war was having on the economy.

But data released on Monday also showed several bright spots. Domestic consumption, as indicated by retail sales, rose 9.8 per cent in June from a year earlier. This is up from 8.6 per cent in May and 7.2 per cent in April – the lowest figure since 2003.

Industrial production in June also grew 6.3 per cent year on year, 1.3 percentage points faster than in May, when it had slumped to a 17-year low.

Peking University finance professor Michael Pettis said GDP growth has slowed because of the trade war, and Beijing’s efforts to control debt levels.

One thing to watch for going forward is whether growth numbers pick up – this would be a sign that Beijing is unleashing stimulus measures to boost the economy which could also worsen existing debt risks, he said.

“The numbers (today) are not surprising, what really matters is how Beijing will react to the numbers,” said Prof Pettis.

Tsinghua University economist Yuan Gangming said he expects economic growth in the third and final quarter will continue to fall, estimating full-year growth to come in at 6.2 per cent.

Domestic concerns will likely pose greater downward pressure on the economy, he said: “As China makes adjustments to restructure and upgrade industries, this process will also cause economic growth to slow down.”

Monday’s data follows trade figures released last week, which showed that exports and imports had dipped in June following an escalation of the trade war in May which saw heightened tariffs imposed on Chinese goods.

Although both US President Donald Trump and Chinese President Xi Jinping met at the G-20 in Osaka and declared a trade war truce, tariffs remain on the US$360 billion worth of goods from both sides, while trade talks get underway.

Beijing has so far leaned largely on supply-side stimulus to drive growth. This year it has announced massive tax cuts of almost 2 trillion yuan (S$395 billion) for businesses.

Policymakers have already pledged to take further action. Premier Li Keqiang said at a state council meeting this month that the government would lower tariffs and increase tax rebates to support exporters.

But analysts say the bright spots in June were unlikely to endure, which could prompt the government to roll out stimulus measures to boost demand and drive growth.

A research note by Fitch Solutions Macro Research on Monday said the economic slowdown could result in wage cuts and job losses which would weigh down domestic consumption.

Beijing would likely move to mitigate this, they said: “We believe that the government will soon announce concrete measures in an effort to boost demand, and in particular disposable incomes of rural and urban residents.”



Enjoyed this story? Share it.


About the Author: The Straits Times is Singapore's top-selling newspaper.

Eastern Briefings

All you need to know about Asia


Our Eastern Briefings Newsletter presents curated stories from 22 Asian newspapers from South, Southeast and Northeast Asia.

Sign up and stay updated with the latest news.



By providing us with your email address, you agree to our Privacy Policy and Terms of Service.

View Today's Newsletter Here

Economics

China pledges international pandemic aid

 Producers of medical goods urged to meet demand from affected countries. China has pledged to do its best to offer aid to countries and international organisations affected by COVID-19 to help contain the outbreak, and businesses are being urged to boost production of epidemic prevention materials to meet demand from abroad. The announcement was made at a meeting of the leading group of China’s coronavirus response, chaired by Premier Li Keqiang on Thursday. Relevant departments and local authorities must step up co-ordination to closely monitor and analyse the quick spread of the outbreak outside China and roll out more targeted measures to prevent the import and export of infection, the group said in a statement. It is important to further


By China Daily
March 13, 2020

Economics

Back to work in Beijing, with tough measures in place

 Mandatory quarantine for those coming from overseas; some Wuhan businesses may reopen. As most of China attempts to return to normalcy after an extensive lockdown to curb the spread of the coronavirus, the capital Beijing has been carefully trying to strike a balance between having people restart work while also trying to keep out imported infections, and yesterday ordered a mandatory quarantine for all international arrivals. This comes as the Hubei government announced that some businesses in Wuhan, the outbreak’s epicentre, would gradually be allowed to reopen. On Tuesday, Chinese President Xi Jinping visited Wuhan, his first visit to the city since the outbreak, a sign that the crisis could finally be easing after the government’s toug


By The Straits Times
March 12, 2020

Economics

Xi vows victory over coronavirus in Wuhan

President expresses condolences to families of people who died in epidemic. President Xi Jinping said on Tuesday that prevention and control of the novel coronavirus outbreak remains the top priority and most important task, even amid the recent positive signs. Xi, who is also general secretary of the Communist Party of China Central Committee and chairman of the Central Military Commission, made the remark during his inspection tour in the outbreak’s epicentre, Wuhan, capital of Hubei province. The spread of the novel coronavirus has been basically curbed in Hubei and Wuhan, Xi said, adding that initial success has been made in stabilising the situation and turning the tide in Hubei and Wuhan. Xi encouraged local residents and front-line worke


By China Daily
March 11, 2020

Economics

China sets example in fighting virus

Epidemic reveals inadequacies in global governance; Beijing says it’s ready to help. China’s response to novel coronavirus pneumonia has set an example for the world in coping with the contagion and offered experience in advancing global public health governance, officials and experts said. The COVID-19 outbreak has also raised the alarm about global public health security and reminded countries that co-operation and co-ordination are needed to deal with challenges as infectious diseases can rapidly escalate into global emergencies, they said. There is a growing positive momentum in epidemic control nationwide thanks to the “comprehensive, thorough and rigorous” measures that China has taken to contain the virus, they said, noting that the daily


By China Daily
March 10, 2020

Economics

More than 800,000 people return Beijing under quarantine

“There’s still a risk of an outbreak of the disease with people coming to Beijing from other cities and countries,” Zhang Tongjun, deputy head of a group for prevention and control work in the city’s residential communities, said during an afternoon conference. About 827,000 people who came back to Beijing from outside the city are still in a 14-day quarantine to see if they had been infected with the novel coronavirus, an official said on Friday. “There’s still a risk of an outbreak of the disease with people coming to Beijing from other cities and countries,” Zhang Tongjun, deputy head of a group for prevention and control work in the city’s residential communities, said during an afternoon conference. Z


By China Daily
March 9, 2020

Economics

South Korea declares third city as special care zone as cases spike

President Moon receives letter of support from North Korean leader as infected cases cross 6,000. South Korea has declared a third city a “special care zone” to boost its capability to fight a spike in coronavirus infections, with cases nationwide soaring beyond 6,000. The death toll stands at 42, mostly the elderly with underlying health conditions, while 88 people have recovered, including 47 discharged yesterday. The care zone announcement came as the presidential Blue House revealed that South Korean President Moon Jae-in received a letter on Wednesday from North Korean leader Kim Jong Un expressing support and comfort to the people battling the coronavirus outbreak, adding that he is confident they will “prevail in this fight wit


By The Straits Times
March 6, 2020