Economy

As US-China Trade Deal Is Signed, China's Slower Growth Comes Into Focus

Jon C. Ogg

It’s been said for many years that China has been the world’s growth engine. China now claims to have about 1.4 billion people. The nation’s gross domestic product (GDP) has grown at two to three times that of the United States and exponentially higher than Europe. With a slowing economy and with trade tensions with the United States high in 2019, China’s growth rate came in at 30-year lows.

This may be one of those reports where the bulls and bears alike could each cherry-pick the good and the bad for how much growth can be expected from China. As of Friday’s morning trading, the Dow Jones industrials, S&P 500 and Nasdaq were all in positive territory, and this was another day when all three major stock indexes hit record highs again.

China’s National Bureau of Statistics reported on Friday that the country’s national economy was generally stable in 2019 and that its main projected targets for development were achieved. The nation’s economy rose by 6.1% in all of 2019. That is huge for any Western nation, but that is subpar growth needed to keep adding jobs and helping the industries in China. To show how the trade impact and slower global growth was a drag over the course of 2019, the Statistics Bureau said that the 6.4% growth in the first quarter slid to 6.2% in the second quarter, and that fell to 6.0% in both the third and fourth quarters of 2019.

While many parts of the economy were within China’s targets, trade, investment, business confidence and consumer spending were drags. The news in general looked weaker than in prior years, but there was also some stabilization in December. China showed that its rate of industrial production was bolstered by above-consensus 6.9% output growth rate in December. That was the fastest pace in about nine months.

This statement in the Statistics release should show how there was mixed pressure toward the end of 2019:

In the first eleven months of 2019, the total profits made by industrial enterprises above the designated size was 5,610.1 billion yuan, down by 2.1 percent year-on-year, 0.8 percentage points lower than that of the first ten months. The profits of industrial enterprises above the designated size in November grew by 5.4 percent year-on-year, while that for October was down by 9.9 percent.

China’s Index of Services Production rose by 6.9% in 2019. The breakdown indicated that information transmission, software and information technology services rose by 18.7%, leasing and business services rose by 8.7%, financial intermediation rose by 7.2% and transportation, storage and post rose 7.1%.

China is also seeing its share of online retail sales growth. Total sales of all consumer goods rose by 8.0% to 41.1649 trillion yuan (about $6 trillion in U.S. dollars at the current exchange rate). As for the portion of that online sales growth, the Statistics Bureau release said:

In 2019, the online retail sales reached 10,632.4 billion yuan, a year-on-year growth of 16.5 percent. Specifically, the online retail sales of physical goods were 8,523.9 billion yuan, up by 19.5 percent, accounting for 20.7 percent of the total retail sales of consumer goods, or 2.3 percentage points higher than that of the previous year.

China showed that that grain output reached a new record and growth was seen in most meat and protein categories, but pork was down by 21.3% due to ongoing swine fever issues deeply affecting its contribution. China also revealed that industrial enterprise grew by 5.7% in 2019, and the value of state holding enterprises rose by 4.8%. The value of mining was up 5% in 2019, while manufacturing rose 6%, and the combined value of electricity, thermal power, gas and water rose 7%. The valued added of high tech manufacturing rose by 8.8% and the value added from strategic emerging industries rose by 8.4%.

China’s count of newly increased employed people in urban areas was 13.52 million, up from its projected target of 11 million and staying above the 13 million mark for the seventh year in a row. China’s per capita disposable income was 30,733 yuan (or $4,480 U.S. dollars), and that was up by 8.9% from 2018 with a real gain of about 5.8% after deducting price factors. For urban households, that per capita disposable income rose by 7.9% nominally (5.0% on a real adjusted basis) to 42,359 yuan (about $6,200 U.S. dollars at current exchange rates), and that is 2.64 times that of rural households.

After evaluating all the data released from China, it is still too soon to determine whether all the drag from trade and slower global growth has bottomed out completely. The trade deal was just signed this week, and many firms likely had expected this deal to be signed when they were operating in December. Even considering that some economists rate the quality of China’s economic statistics with skepticism, the data could have been worse, with all the global and macro issues out there.