China economy showing effects of trade war as growth slows again in November

18-December-2018

The Chinese economy weakened further in November, as the trade war with the United States continued to take a toll on growth, according to economic data released on Friday.

The data suggest that fourth quarter growth will slow further from the decade-low gross domestic product (GDP) growth rate of 6.5 per cent posted in the third quarter.

Retail sales growth decelerated sharply to 8.1 per cent from the 8.6 per cent rate in October, lower than the 8.8 per cent rate expected by analysts polled by Bloomberg. The November growth rate was the lowest since the 4.3 per cent gain posted in May 2003.

The slowing of headline retail sales suggests that record sales during the Singles’ Day marathon on November 11 could not offset declines in other areas, such as car sales, which fell 16.1 per cent during the month, year on year, according to the China Association of Automobile Manufacturers.

Industrial production grew 5.4 per cent in November compared to the previous year, well below the 5.9 per cent gain in October and expectation for a like-sized 5.9 per cent rise this month, according to the median forecast in a Bloomberg survey. The November growth rate was the lowest in 10 years, matching the 5.4 per cent gain in November 2008.

Fixed-asset investment was the lone bright spot in the data, growing 5.9 per cent in the January to November period, up from 5.7 per cent in the first 10 months of the year and slightly above expectations for a 5.8 per cent gain.

Property investment growth rate was stable at 9.7 per cent in November, indicating that government-mandated infrastructure investment has started to take effect.

Analysts predicted that growth will be hit hardest in the first half of next year when the full effect of US tariffs is felt.

The government will hold its Central Economic Work Conference starting next Tuesday to set the economic policy priorities for next year.

The meeting is expected to set a lower growth target for 2019 while approving greater fiscal spending, including a higher budget deficit than this year’s 2.6 per cent of GDP, as well as larger tax cuts than this year’s 1.2 trillion yuan (US$174 billion), are anticipated.

More monetary policy easing, including more cuts in bank’s required reserve ratio and possibly even a policy rate reduction, are also envisaged.

Source: SOUTH CHINA MORNING POST