China’s economy expanded at its slowest pace in about 30 years at 6 per cent in the third quarter of 2019 compared with a year earlier, delivering another blow to global growth, according to figures released by the National Bureau of Statistics on Friday.
The country’s trade war with the US and cooling manufacturing and investment sentiment took a toll on the world’s second-largest economy between July and September, the figures, which were slightly lower than analysts’ expectations, showed.
China’s growth is now running at a level comparable with the late 1980s. However, the overall size of the economy is now far larger and, by many accounts, cannot continue expanding at double-digit rates.
“Generally speaking, the national economy maintained overall stability in the first three quarters,” the National Statistics Bureau said. “However, we must be aware that given the complicated and severe economic conditions both at home and abroad, the slowing global economic growth, and increasing external instabilities and uncertainties, the economy is under mounting downward pressure.”
The figures come as the IMF warned this week that global growth is set to fall to its lowest level since the international financial crisis as the US-China trade war took its toll on confidence and investment.
The world economy was set to grow 3 per cent in 2019, down from 3.8 per cent in 2017 and 0.3 percentage points below its equivalent forecast six months ago, the IMF said.
At the top of the list of worries for China and its leader Xi Jinping is the trade war. In September, Chinese exports fell 3.2 per cent year on year in a sign that the impact of the trade dispute has deepened from earlier in the year.
The manufacturers that feed China’s lucrative export-oriented industry have also taken a hit from the trade dispute, with producer prices falling 1.2 per cent year on year in September, the largest drop since July 2017.
Beijing and Washington reached a limited deal last week, in what was the first tangible sign of progress in months. But many economists are still preparing for an increasingly negative outcome this year or in 2020 for the Chinese economy.
“A truce between the US and China may boost sentiment, but we maintain our view that the worst is yet to come,” economists at Nomura said in a note to investors earlier this week.
Domestic challenges are escalating as well. In the midst of an outbreak of African swine fever, official data for September showed that the price of pork shot up by nearly 70 per cent compared with last year, something that drove up overall consumer prices by 3 per cent. China is the world’s largest producer and consumer of pork.
Local governments, which power much of China’s economy through building roads and bridges helping the government hit its growth targets, are also running out of projects to fund that generate returns. Many small banks have come under pressure as well, as bad loans crowd out their capacity to lend to healthy private business.
The debate over the past five years, as growth has shown signs of slowing, is whether China and its political system can shoulder the pressures associated with a cooling economy. These include higher unemployment, distressed banks and waning prospects for many people in less developed regions that have yet to benefit from the country’s growth following the decades-long opening up of the economy.
China’s regulators attempted to stimulate growth with tax cuts at the beginning of the year, although many economists note that these will not be effective in bolstering economic activity in the short term. The government has also pushed local governments to issue more bonds in order to finance more projects.
The central bank is expected to continue to loosen monetary policy. However, credit growth remains below what most experts think can buoy the economy during a slowdown.