China's 2018 GDP growth slowest since 1990 amid trade war with U.S.

22, Jan. 2019

BEIJING, Kyodo - The pace of China's economic growth was its slowest in 28 years in 2018, expanding 6.6 percent from a year earlier, as a tit-for-tat tariff escalation with the United States took its toll on the world's second-largest economy, official data showed Monday.

The latest gross domestic product data came as Chinese economic activities have suffered the effects of an intensifying trade war with the world's biggest economy. The administration of U.S. President Donald Trump has imposed huge tariffs on a wide range of imports from China.

The headline figure was slightly higher than the Chinese government's target of around 6.5 percent for the year, but it was down from the 6.8 percent growth in GDP in 2017.

An economic downturn in China -- which has established itself as the "world's factory" with its abundant labor force and substantial resources in raw materials -- would become a serious risk for the global economy ahead, many economists say.

In 2017, China's economic growth accelerated for the first time in seven years on the back of robust exports, although the leadership led by President Xi Jinping took belt-tightening measures to restrain an overheated property market and protect the environment.

The 6.6 percent increase in 2018 was the weakest since 1990, when the Chinese economy grew only 3.9 percent. In 1989, the pro-democracy protests and military crackdown in Beijing's Tiananmen Square started to hurt the nation's economy.

China's economy is expected to lose momentum further, as prices of the country's products will be driven up in the United States, the world's largest market, stifling exports -- a major driver of the Chinese economy.

A possible economic slowdown is also likely to frustrate efforts of Xi's leadership of attaining its goal of building a "moderately prosperous society," defined by Beijing as doubling its 2010 GDP and per capita income by 2020.

Chinese GDP last year totaled 90.03 trillion yuan ($13.27 trillion), according to the Chinese National Bureau of Statistics.

Investment in fixed assets, excluding rural households, rose 5.9 percent and retail sales of consumer goods climbed 9.0 percent in 2018, but both were more than 1.0 percentage point lower than those in the previous year.

"In 2018 the national economy performed within an appropriate range, maintaining the general stable momentum by pursuing progress while ensuring stability," the bureau said.

Beijing, however, should be "aware that there are concerns over the changes amid the stable economic performance, and the external environment is complicated and severe, the economy still faces downward pressure," it added.

The total value of exports increased 7.1 percent in 2018, down from over 10 percent increase in 2017. Analysts say China's shipments will continue to weaken as Trump has urged Beijing to take action to curb its massive trade surplus with the United States.

With little sign of recovery in exports, Xi's leadership has recently pledged to carry out large-scale tax cuts and fiscal expansion to lessen the negative impact of the ongoing trade spat by bolstering domestic demand.

During the October-December period last year, China's economy grew 6.4 percent, 0.1 point lower than the July-September quarter, as a trade dispute with the United States weighed down investment and consumer spending at home.

Washington has so far imposed tariffs of up to 25 percent on about half the goods it imports from China each year -- in response to Beijing's alleged intellectual property and technology theft, as well as other trade complaints.

In retaliation, Beijing has imposed tariffs on more than 80 percent of all U.S. imports.

At their meeting on Dec. 1 in Buenos Aires, Trump and Xi agreed that the United States and China would hold off on imposing further tariffs on each other's imports and try to complete talks on technology and intellectual property rights issues within 90 days.

The United States, meanwhile, has warned that if the governments of the world's two biggest economies fail to narrow the differences before the clock runs out, trade strains would be rekindled.

Washington and Beijing have made progress on matters such as the expansion of Chinese purchases of U.S. products, but they remain at odds over China's alleged unfair business practices like technology theft and provision of opaque benefits to state-owned companies. (Kyodo)