China has suffered a severe slowdown in the fourth quarter of its economic growth in 2018 and the reasons are near obvious. There have been pressures from staggering domestic demand and bruising US tariffs.
It has dragged the 2018 growth to the lowest in three decades and has pressed China to come up with a plan to stave off a sharper slowdown.
A third of global growth has been generated in China attributing to the growing signs of weakness and this has raised anxiety about risks to the world economy. Thus, to reduce the risks of massive job losses, the policy makers have pledged more support this year and they are weighing on profits from firms ranging from Apple to retail giants and fashion biggies.
The means to support the economy lies very much in the hands of the government who can expand infrastructure spending and cut banks' reserve requirement ratio. This way, they won’t have to bother about capital spending. But the real problem appears in the consumption pattern. Slashing of the US and China on numerous fronts have led to the hurting of consumers' sentiments.
Consumption has been supported by solid wage growth until now but now a vague anxiety about the future seems to have been bothering everyone. Since the global financial crisis, the fourth-quarter gross domestic product (GDP) grew at the slowest pace. It had eased to 6.4% on-year from 6.5% in the third quarter. This pulled the full year growth to 6.6% which was the slowest annual growth pace since the 1990. There was a revised 6.8% growth rate in GDP in 2017.
It would take time for growth measures to tick in and conditions are likely to worsen before getting better as speculated by analysts. That would lead to the slowing of growth to 6.3% this year. Actual growth is however much weaker than suggested by the official data as per few China watchers.
A raft of policy easing steps have been taken so far, yet there has been continued weakness across broad areas of the economy at the end of the last year as stated in the December data released along with the GDP growth.
Among a few bright spots remained the factory sector output that showed an unexpected rise from 5.4% to 5.7%. Construction projects have been fast-tracked by the regulators but the real reason of most of the growth has been higher mining and oil production.
The latest data released stated the jobless rate edging higher besides the consistent languishing of investment and retail sales.
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