[For the full year, according to official data, the Chinese economy grew 6.6 percent. That’s the weakest pace of growth since 1990, when China’s economic miracle stumbled in the aftermath of the crackdown on protesters in Tiananmen Square the year before.]
By
Keith Bradsher
BEIJING
— China’s economy is
slowing, and the slowdown is probably worse than Beijing says.
Official numbers released on Monday show an
economy that is posting new, but manageable, lows. For the last three months of
2018, growth came in at 6.4 percent compared with a year earlier. That’s the
slowest pace since a decade ago, when China was grappling with the global
financial crisis.
For the full year, according to official
data, the Chinese economy grew 6.6 percent. That’s the weakest pace of growth
since 1990, when China’s economic miracle stumbled in the aftermath of the
crackdown on protesters in Tiananmen Square the year before.
As slowdowns go, the numbers indicate a mild
one befitting a big, maturing economy like China’s. While the figures match
historic lows, they show only a small drop from previous periods.
Monthly data released on Monday also
suggested better-than-expected consumer spending and industrial production in
December, raising the possibility that growth is stabilizing.
More detailed data tell a less positive
story.
From investment to consumer spending to
factory activity, the Chinese economy slowed markedly in the second half of the
year. The figures also indicate that the trade war with the United States is
taking more of a bite.
Moreover, the December uptick comes in large
part from Beijing’s efforts to get growth going again. While China’s leaders
have quite a few ways to juice growth if their current efforts aren’t enough,
their options often come with tricky trade-offs that could add to the country’s
debt problems or add to other imbalances plaguing the economy.
China’s slowdown is one of many reasons that
the world economy is gradually decelerating. At a briefing on Monday afternoon
at the start of the World Economic Forum meeting in Davos, Switzerland, the
International Monetary Fund said that Germany, Italy, Mexico and Turkey each
face slower growth in the year ahead than previously expected, for a variety of
reasons particular to each country.
“The world economy is growing more slowly
than expected, and risks are rising,” said Christine Lagarde, the managing
director of the I.M.F. “Does that mean that a global recession is around the
corner? No. But the risk of a sharper decline in global growth has certainly
increased.”
By
the Numbers
Beijing took steps to rekindle growth at the
end of last year, and it showed. Retail sales and industrial output ticked up
in December from November, suggesting consumers and businesses alike were
feeling a little better as the year came to an end.
But those monthly figures could not fully
make up for a lackluster performance in the second half of the year. Retail
sales slowed markedly during those last six months, weighted by a steep tumble
in activity at China’s car dealerships and broad weakness in smartphone sales.
Investment in fixed assets like new factories and office buildings was anemic.
“China’s economy has slowed significantly in
recent months,” said Louis Kuijs, a China specialist at Oxford Economics, a
large consulting firm.
More broadly, many economists have estimated
that China’s slowdown is worse than the government’s figures show, citing more
detailed data. Some economists estimate growth is just a fraction of the
headline figure, though most economists who crunch the figures say the number
is only a percentage point or two lower.
The question now is whether an improvement in
December will carry over to the start of 2019. Despite the positive signs,
China just two weeks ago decided to pump tens of billions of dollars into the
financial system, suggesting that it sees a recovery as fragile at best.
Trade
Trouble
China’s economic problems began before Mr.
Trump began imposing tariffs on Chinese-made goods. That said, the trade war is
not helping.
Activity has also slowed lately at many
export-oriented factories. Many rushed to ship goods to the United States
before a feared increase in tariffs on Jan. 1 that did not end up happening,
filling warehouses with surplus goods. Many Chinese factories have eliminated
overtime and looked for other ways to trim employment costs.
Economists at J.P. Morgan, the investment
bank, on Monday slightly reduced their growth expectations for the first three
months of the year, citing weaker-than-expected December trade figures.
“Manufacturing has sunk from buoy to anchor
over the past two quarters,” the China Beige Book, an economic consulting firm,
concluded in an analysis last month.
Driving
the Slowdown
Some economists note that the biggest factor
driving the weakness in retail sales in China, which by some estimates has
accounted for half or more of the entire slowdown, is a sharp fall in auto
sales.
Auto sales have been falling since summer,
with sales in December down a precipitous 19 percent from a year earlier. But
China had a modest tax break for car buyers in 2016 that became smaller in 2017
and then disappeared entirely last year. Those tax policies may have pulled
ahead some demand to 2016 and 2017, leaving the market poised for a drop last
year.
“It is because we had a high number in 2017
that the 2018 market has so much pressure,” Cui Dongshu, secretary general of
the China Passenger Cars Association, said in a phone interview.
Sliding sales at car dealerships prompted a
wave of production cuts at assembly plants across China. That in turn cut into
demand for auto parts, steel, glass and other materials.
But help may be on the way. Lian Weiliang,
the vice chairman of the National Development and Reform Commission, said at a
news conference last week that China would draft policies to “stabilize”
consumption of cars and household appliances.
How
Long Will It Last?
The Chinese government has allowed big-ticket
projects, like new subway lines in many cities, to move forward, and it has
pumped more money into the financial system. China’s leaders have also pledged
to cut taxes to shore up sagging business sentiment.
The efforts “will boost the economy in the
second half of this year,” said Shen Jianguang, the chief economist at JD.com,
a big Chinese online retailer.
One big option that China still has: help the
housing market.
Building and outfitting homes and other
buildings represents as much as a quarter of the country’s economic activity by
some estimates. China could take measures like loosening limits on mortgage
lending and easing the ability of property developers to buy land and deal with
their debt. But that approach comes with dangers. The sector is already
overbuilt and plagued with speculation, something the Chinese authorities have
long tried to contain.
“Property easing will be used as a last
resort, not a priority,” said Tao Wang, a China economist at the Swiss bank
UBS.
Follow Keith Bradsher on Twitter:
@KeithBradsher.
Ailin Tang contributed research.
