China’s 2018 economic growth fell to a three-decade low, adding to pressure on Beijing to settle a tariff war with Washington.
The world’s second-largest economy expanded by 6.6 percent over a year earlier, down from 2017′s 6.9 percent, official data showed Monday. Growth in the three months ending in December dipped to 6.4 percent — the lowest quarterly level since the 2008 global crisis — from the previous quarter’s 6.5 percent.
Communist leaders are trying to steer China to slower, more self-sustaining growth based on consumer spending instead of trade and investment. But the deceleration has been sharper than expected, prompting Beijing to step up government spending and order banks to lend more to shore up growth and avoid politically dangerous job losses.
“Growth will remain under pressure,” said Louis Kuijs of Oxford Economics in a report. “Key risks are the ongoing trade tension with the U.S. and that credit growth does not recover.”
Exports held up through most of 2018 despite President Donald Trump’s tariff hikes on Chinese imports in a fight over Beijing’s technology ambitions. But they contracted in December as the penalties began to depress U.S. demand.
Economic growth in 2018 was the lowest since 1990′s 3.9 percent in the aftermath of the violent crackdown on pro-democracy protests centered on Beijing’s Tiananmen Square.
Growth in investment, retail spending and factory activity all declined, the National Bureau of Statistics reported.
The impact of U.S. tariffs was limited, but China faces pressure from growing global support for import controls, volatile financial markets and declining investment spending, said the bureau commissioner, Ning Jizhe.
“Downward pressure on the economy is increasing,” said Ning at a news conference. Still, he added later, “the Chinese economy’s resilience and ability to resist shocks and the long-term trend of stability will not change.”
The slowdown is adding to pressure on President Xi Jinping’s government to settle its costly dispute with Washington.
The two sides have imposed tariff hikes of up to 25 percent on tens of billions of dollars of each other’s goods in the fight over U.S. complaints Beijing steals or pressures companies to hand over technology. Washington is pressing China to roll back plans for state-led industry development that its trading partners say violate its market-opening obligations.
That dispute has rattled Chinese consumers that Beijing is counting on to drive growth. Some are cutting spending, which might worsen the downturn.
In a possible sign of progress, Beijing announced Friday its top trade envoy, Vice Premier Liu He, will visit Washington for talks Jan. 30-31. Business groups and economists said a decision by Liu and his American counterpart, Robert Lighthizer, to get directly involved would suggest earlier talks by lower-level officials made progress.
Trump said Saturday that trade relations with China were “going very well” and “a deal could very well happen.”
Forecasters expect Chinese growth to bottom out this year as Beijing’s stimulus efforts gain traction. However, they have pushed back the time frame for that due to weakening exports.
Government-led spending on public works construction “is shaping up to be the engine for 2019,” Iris Pang of ING said in a report. “However, non-infrastructure business activities will be dismal this year. And debt will grow.”
A meeting of leaders of the ruling Communist Party in December promised tax cuts, better access to bank lending for entrepreneurs and other steps to help the private sector that generates China’s new jobs and wealth.
Chinese leaders warned earlier any recovery would be “L-shaped.” That means companies and investors shouldn’t expect growth to rebound to the previous decade’s double-digit levels.
Forecasters expect growth to decline further this year to 6.3 percent or lower.
“A key downside risk to the Chinese growth outlook will be if the U.S.-China trade war escalates, should the temporary truce expire without any trade deal being struck,” Rajiv Biswas of IHS Markit said in an email.
