Now a commercial war with the United States is starting to bite China


Night to Monday, China's statistical authorities put forward development data that showed the weakest economic growth in China for almost 30 years. While the level of 6.6 percent in 2018 measured against the previous year (6.8) would be the cause of jealousy for developed countries, one must in China go back to 1990 to find the same number.

Most experts point out that trade conflicts with the United States have begun to deteriorate. Combined with strong debt accumulation, it still records high but stable consumption, and weaker investment, this creates increasing concern for world economic growth.

That evening's program, however, did not seem to reduce market optimism. All leading Asian stock exchanges ended at Monday morning hours.

– The prospect is not bright

Nordea Markets expert and chief analyst Amy Yuan Zhuang also doesn't care much, even though the prospect is not the best. From his headquarters in Singapore, he expects action by the state to maintain steam.

"China's growth was the lowest in decades due to the US trade conflict. Prospects are not bright for this year, although we expect increased stimulus measures to prevent uncontrolled weakness," Zhuang wrote in an update Monday.

Chief analyst Amy Yuan Zhuang, Nordea Markets.

Chief analyst Amy Yuan Zhuang, Nordea Markets.
(Photo: Nordea)

The fact that the US trade conflict began to bite became clear in the latest growth figures for the fourth quarter.

Quarterly economic growth in China was 6.4 percent last year, down from 6.5 percent in the third quarter. This is the weakest level since the first quarter of 2009, when the collapse of Lehman sent shock waves to the world economy.

Nordea, however, predicted an even weaker trend in the fourth quarter, and forecast growth of 6.2 percent.

"Exports fall"

At the same time as the figures for gross domestic product (GNP), Chinese authorities also released monthly data on retail, industrial production and fixed asset investment overnight on Monday.

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Industrial production rose 5.7 percent in December, compared with the same period last year, compared with an estimated 5.3 percent. For the period from January to December, industrial production rose 6.2 percent against 2017.

"This does not change the bleak picture suggested by some other indicators. Exports fell in December. PMI activity indicators for manufacturing fell below 50 (below 50 showed declining activity, accounting reports) for the first time in more than two years .

Car sales have fallen steadily since July and may mark 2018 as the first year with an annual decline of 20 years. The latter contradicts the fact that consumption contributed to most of the growth in the fourth quarter, "Zhuang wrote.

Retail sales rose 8.2 percent in December, steady against the same period a year earlier, as expected. In the period from January to December, the growth is thus NI percent compared to 2017.

Investment rose 5.9 percent in the January to December period compared to the same period in 2017, somewhat weaker than the estimated 6.0 percent.

At the same time, unemployment in China, where unemployment was 4.9 percent in December, increased from 4.8 percent the previous month.

New fear

Nordea analysts believe fears of a sharp slowdown in economic growth in recent weeks have replaced trade disputes with the United States as a major concern in China.

Chinese authorities since July implemented a number of budget and monetary policies, which so far have not reversed the slowdown, according to the Financial Times.

Weak optimism in the business sector and among consumers has encouraged authorities to further enhance their efforts. In addition to export discounts and personal tax breaks, Chinese authorities now plan to launch more infrastructure investment, according to him.

Professor Eswar Prasad at Cornell University, who was previously the Manager of the China International Monetary Fund (IMF), also argued that statistics from China were misleading.

"The overall data continues to show a relatively good image that is increasingly out of line with the increasing perception of economic discomfort and heartache in business, consumers and investors," Prasad told FT.

Zhuang at Nordea Markets also showed that the authorities had made plans to increase the purchase of cars and household household products.

Assistance in housing policies is not expected on a national scale, but some cities will have more room for their own practice to increase housing sales and construction activities, he believes.

"Although we predict the uncertainty of the trade war will continue to slow down this year, we believe an increase in monetary and budgetary measures will prevent an uncontrolled slowdown in China. Soft landing is the most likely scenario," the analyst wrote.

Senior economist Marius Gonsholt Hov at Handelsbanken Capital Markets seems to agree.

"Looking ahead, we expect continued weak global demand and lower credit growth to curb GDP growth. But throughout the year, stimulus measures should help control this slowdown," he wrote in an update Monday.(Terms)Næringsliv Dagens Copyright US and / or our suppliers. We want you to share our cashing using a link, which leads directly to our page. Copying or other forms of use of all or part of the content can only occur after written permission or as permitted by law. For further requirements see here.

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