China experienced its weakest economic growth in almost three decades as the country is confronting growing risks and challenges nationally and abroad.
Data from the National Bureau of Statistics, China’s economy or gross domestic product (GDP) grew 6.1% in 2019, a sharp decline from 6.6% in 2018. The country’s annual GDP growth rate was close to the bottom of the Chinese government’s forecast at 6% to 6.5%.
In the fourth quarter, China’s GDP growth was 6%, similar to its third quarter performance. However, it was lower than its economic growth in second and first quarter at 6.2% and 6.4% respectively.
Over the past 15 quarters, the world’s second largest economy has been growing at a steady pace within the range of 6.5% to 7%.
World economists have been expecting an economic deceleration in China primarily due to the weakening of domestic demand, rising debt and its ongoing trade war with the United States.
Chinese Officials Focused on Maintaining Economic Stability
Although the country’s economy is slowing down, it remains strong as the global economic growth was 2.9% last year.
Chinese officials said their economy “generally stable” citing the reason that they achieved their major development targets last year. China’s achievements “laid a solid foundation for completing” its goal of establishing a “moderately prosperous society.”
China’s 2019 GDP per capita was $10,276 USD, up from $1,000 USD in 2000. The World Bank still classifies China as a middle-income country. However, its GDP per capita is close to reaching the global average of $11,312 USD.
Beijing is expected to implement more fiscal and monetary policies to maintain economic stability. Among the actions in consideration include reducing taxes and allowing local government sell large amount of bonds to fund infrastructure projects. However, it will not provide substantial amount of economic stimulus as it does not want to repeat accumulating massive debt, which happened after implementing large amounts of stimulus during the 2008 global economic crisis.
This year, one of the priorities of Chinese policymakers is to limit risks to the country’s financial system. Last year, China’s corporate bond defaults reached a new record high at $18.6 billion.
China Signs Phase One Trade Deal with the United States
China released its GDP growth after signing the phase one trade deal with the United States. The initial agreement helped alleviate concerns about the country slowing economic growth.
The country’s national statistics chief, Ning Jizhe said the phase one trade deal provides people additional reason to think positive about its future economic growth.
Chaoping Zhu, global market strategist at JP Morgan Asset Management commented: “Although the US government maintained most of the tariffs on Chinese products, the signing of the phase-one trade deal is a signal that the situation is unlikely to deteriorate. Against this background, corporate confidence keeps improving in the recent month.”
During his remarks at the World Economic Forum in Davos, Switzerland, China’s Vice Premier Han Zheng expressed optimism that the initial trade agreement is beneficial to the world.
According to Han: “The phase one trade deal is good for the US, China and the world. China’s increasing purchases of US goods are in accordance with WTO guidelines and will not impact its imports from other countries.”
“China will open its door wider. Though facing some protectionism from some countries, the determination to open up will not waver,” he added.
China’s Vice Premier Liu He expressed optimism on the country’s economy because it is driven by innovation and it is cutting its dependence on debt.
Article By: Marivic Cabural