Published: Wed, January 23, 2019
Finance | By Jaime Brady

China's growth slowed by service, farm sectors, despite construction rebound

China's growth slowed by service, farm sectors, despite construction rebound

According to data provided today by the National Statistics Bureau, the Chinese economy grew by 6.6% a year ago.

"But the problem lies in consumption".

As for the new economic engines for Chinese economy, he sees potential in the Greater Bay Area.

Consumer price index rose 2.1 percent year on year in 2018, achieving the government's target of capping consumer inflation below 3 percent.

Previous to knowing the official data on Monday, multiple analyzes on the causes of the discrete dynamism of the Gross Domestic Product (GDP) of China past year already circulated and put special emphasis on the effect of the trade war that the United States declared to it.

China consumes almost half the world's copper and the metal is considered a good barometer of economic conditions given its widespread use in power grids, communication networks, manufacturing and construction.

Analysts at Morgan Stanley said last week that they had turned bullish on the yuan, both because the People's Bank of China (PBOC) would refrain from intervening during trade talks and as companies convert more dollars into yuan ahead of Lunar New Year payments.

He said: "The Chinese data, while there are some positives on the retail and industrial production side, is just confirmation the Chinese economy is also slowing and adds to the ongoing economic pessimism".

Katrina Ell, an economist with Moody's Analytics in Sydney, noted: "If China continues with its measured and piecemeal approach to stimulus, global growth will continue to lose momentum".

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'China's labour participation rate is not considered low worldwide, more than 700 million of our 900 million people (of working age) are employed, and there is still room (for growth),' he said.

While China is locked in a bruising trade war with the U.S., Hatzius pinned much of the slowdown on the government's policy push to curb the overall level of debt in the economy.

Auto sales, a key indicator for Chinese consumption, also dropped last year for the first time in nearly 30 years. "It was a awful year, and it doesn't look like things are getting any better this year", Lu told reporters.

Trade negotiators are facing an early March deadline and Washington has threatened to sharply hike tariffs if there are no substantial signs of agreement.

In a possible sign of progress, the Chinese government announced Friday that its top trade envoy, Vice Premier Liu He, will visit Washington for talks January 30-31.

To free up more funds for lending, particularly to vulnerable smaller firms, the central bank has cut the amount of reserves that banks need to set aside as reserves (RRR) five times over the past year, and guided borrowing costs lower.

Construction enjoyed a strong recovery thanks to support for infrastructure projects, as the government frontloaded local government bond issuance to support their financing.

"The Chinese economy's resilience and ability to resist shocks and the long-term trend of stability has not and will not change", Ning Jizhe, commissioner of the National Bureau of Statistics, told reporters in Beijing.

Still, some analysts do not expect the economy to bottom out convincingly until summer.

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