BCN-28,29,30 China growth hit slowest pace in decades in 2018: AFP survey

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BCN-28

CHINA-ECONOMY-GROWTH,ADVANCER

China growth hit slowest pace in decades in 2018: AFP survey

BEIJING, Jan 18, 2019 (BSS/AFP) – China’s economy grew at its slowest pace
in almost three decades in 2018, analysts in an AFP poll said, as the
government struggles to contain ballooning debt and a bruising trade war with
the United States.

And in a sign of the battle Beijing faces in getting things back on track,
the survey of 13 economists also forecast expansion in the last three months
to be at its weakest since the global financial crisis 10 years ago.

The figures are the latest in a long-running trend that have prompted
officials to vow they will not let the economy “fall off a cliff” and
announce support measures including tax cuts and making it easier for banks
to lend.

The full-year figure of 6.6 percent would be the worst since 1990, when the
economy was hit by outrage over the Tiananmen Square crackdown a year
earlier.

The October-December rate of 6.4 percent marks the slowest quarter since
2009 and indicates China faces a tough year ahead.

“Economic momentum is clearly slowing,” said Raymond Yeung, economist at
ANZ bank.

Relations with top trading partner the United States deteriorated sharply
last year after President Donald Trump hit roughly half of Chinese imports
with new tariffs in an attempt to force trade concessions from Beijing.

The trade war with the US is on hold for now after President Xi Jinping and
Donald Trump agreed a three-month ceasefire while the two sides try to find a
resolution.

Meanwhile China’s top negotiator is heading to Washington for talks this
month ahead of a March deadline to avoid further tariff hikes, while a report
said the US is considering lifting some levies in return for reforms by
Beijing.

While analysts say the standoff has dented confidence — leaving the stock
markets battered and the yuan weakened — they attribute most the downturn to
government policies to tackle growing debt, financial risk and pollution.

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CHINA-ECONOMY-GROWTH,ADVANCER 2 BEIJING

– Stimulus measures –

The 2018 growth forecast is above the official target of around 6.5 percent
but down from the 6.8 percent chalked up in the year before — officials on
Friday revised down the 2017 figure.

The National Bureau of Statistics will release its official results on
Monday.

After halting some major infrastructure projects such as subway lines and
motorways in the first half of the year to keep a lid on debt, policymakers
gradually eased up and encouraged more infrastructure spending in the autumn.

“The squeeze on shadow financing activity took a particularly heavy toll on
infrastructure investment,” economists at Fitch Ratings wrote in a report,
referring to off-the-books loans.

Analysts say the credit tightening also made loans harder to come by for
some would-be car buyers, which contributed to annual car sales falling for
the first time in more than 20 years.

It is one of a raft of recent economic indicators that point to a deepening
slowdown. Imports and exports fell in December while the manufacturing sector
contracted for the first time in more than two years.

Chinese officials have announced tax cuts, fee reductions, and cutting red
tape, among other measures to stimulate the economy.

“We propose to keep the Chinese economy operating in a reasonable range,
which means that we allow the economic growth rate to have certain
fluctuations,” Chinese Premier Li Keqiang told academics and businessmen this
week.

“But it cannot have major ups and major downs, and it cannot ‘fall off a
cliff’,” he said.

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CHINA-ECONOMY-GROWTH,ADVANCER 2 BEIJING

– ‘Sword of Damocles’ –

Li vowed to help private businesses and “take advantage of our massive
domestic market”.

With officials intent on not further inflating the debt bubble, and the
export picture dimming, it has reinforced the need for China to rely on its
legion of consumers to grow its economy.

“We see a fast deceleration on investment and also retail sales, which
weigh on the growth slowdown,” said Liu Ligang, chief China economist at
Citigroup.

“The financial deleveraging made it really hard for the private sectors to
get funding,” he said.

Exports still drive a significant chunk of China’s economy and Washington’s
targeting of cars, machinery, electronics, consumer appliances and other
products have led some firms to shift production out of the country.

Most exporters sped up their shipments across the Pacific to beat the
tariff deadlines, with exports to the US holding up until November.

“The trade war with the US should be regarded as a … Sword of Damocles
for the Chinese economy, but its impact is only really visible in the very
last months of 2018,” said Bjorn Giesbergen, senior economist at Rabobank.

China’s exports fell 4.4 percent in December and shipments to the US
tumbled.

“The drag to growth from exports looks set to intensify even after the
recent announcement to delay the next increase in US tariffs by 90 days,”
said economists at Fitch.

BSS/AFP/HR/1155