China economy weaker in November as effect of trade war sets in
December 18, 2018 Category China News Round-up, Weekly
The Chinese economy weakened further in November, as the trade war with the United States continued to take a toll on growth, according to the latest economic data. The data suggest that fourth quarter growth will slow further from the rate of 6.5% posted in the third quarter. Retail sales growth decelerated sharply to 8.1% from the 8.6% rate in October, lower than the 8.8% rate expected by analysts polled by Bloomberg. The November growth rate was the lowest since the 4.3% gain posted in May 2003. The slowing of retail sales suggests that record sales during November 11 Singles’ Day could not offset declines in other areas, such as car sales, which fell 16.1% during the month, year-on-year, according to the China Association of Automobile Manufacturers (CAAM). Ding Shuang, Chief China Economist at Standard Chartered Bank, said weak auto sales were caused by the expiration of tax rebates for smaller cars, a slowdown in consumer loans partly due to the crackdown on online peer-to-peer lending platforms, and subdued property investment, since new homes are often sold together with garages.
Industrial production grew 5.4% in November compared to the previous year, well below the 5.9% gain in October. The November growth rate was the lowest in 10 years, matching the 5.4% gain in November 2008. Fixed-asset investment (FAI) was the lone bright spot, growing 5.9% in the January to November period, up from 5.7% in the first 10 months of the year. The property investment growth rate was stable at 9.7% in November. Analysts predicted that growth will be hit hardest in the first half of next year when the full effect of U.S. tariffs is felt. National Bureau of Statistics (NBS) Spokesman Mao Shengyong said that China still had the potential to maintain a stable and fast rate of consumption growth next year, given the rise in the number of middle class citizens.
The government is expected to roll out more pro-growth measures, including tax cuts and an increase in fiscal spending, when officials set overall economic policies for 2019 at the Central Economic Work Conference this week.
Foreign direct investment (FDI) in China fell sharply in November as concerns over the tariff battle between China and the United States hit investor confidence. China’s Ministry of Commerce said FDI in the month fell 27.6% year-on-year to USD13.6 billion. “Given the prospect of additional tariffs, foreign companies are afraid to invest in China now,” said Shen Jianguang, Chief Economist at JD Finance in Beijing. FDI in China in the first 11 months of 2018 fell 1.2% year-on-year to CNY793.7 billion.
China’s imports and exports totaled CNY27.88 trillion in the first 11 months, up 11.1% from the same period last year. Exports grew 8.2% to CNY14.92 trillion while imports rose 14.6% to CNY12.96 trillion, narrowing the trade surplus by 21.1% to be CNY1.96 trillion.
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