China's growth edges up but 2016 weakest year since 1990

BEIJING — China's economic growth ticked up in the final quarter of 2016 but its full-year performance was the weakest in three decades as it heads into a potential trade battle with U.S. President-elect Donald Trump.

Trump, who takes office Friday, has promised to hike duties on Chinese goods, putting pressure on industries that employ millions of workers.

Supported by government spending and a real estate boom, the world's second-largest economy expanded by 6.8 percent over a year earlier in the three months ending in December, up from the previous quarter's 6.7 percent, government data showed Friday. Full-year growth was 6.7 percent, down from 2015's 6.9 percent and the weakest since 1990's 3.9 percent.

"A touch faster growth than expected, but no real change in trend," Bill Adams of PNC Financial Services Group said in a report.

China's economy has cooled steadily as communist leaders try to nurture domestic consumption and reduce reliance on trade and investment but trade still supports millions of jobs. Government spending and a surge in real estate sales last year helped offset a 7.7 percent plunge in exports, but analysts expect the economy to cool further.

"We do not expect this rebound to extend far into 2017," Tom Rafferty of the Economist Intelligence Group said in a report.

Export industries could face more pressure, raising the threat of politically dangerous job losses, if Trump goes ahead with promises to raise tariffs on Chinese goods.

In an implicit rebuke to Trump, Chinese President Xi Jinping emphatically defended free trade in a speech Tuesday at the World Economic Forum in Switzerland. He said a "trade war" would harm all countries involved.

Still, a member of the Cabinet's economic planning agency on Friday expressed confidence.

"I am hopeful that after his election, President Trump will consider the issue from the angle of mutual benefit and win-win and will develop the long-term, cooperative 'big country' relations that have been formed between China and the United States," Ning Jizhe told reporters.

Asked about the potential impact of action by Trump, Ning said China should maintain "medium to high-speed growth."

Beijing has relied on repeated infusions of credit to prevent activity from slumping too fast, prompting warnings the run-up in debt could spark a financial crisis or drag on growth.

Chinese leaders have cautioned the economic outlook is "L-shaped," meaning once the downturn ends, growth is unlikely to rebound.

Looking at quarter-on-quarter growth, the way other major economies report data, the economy cooled steadily over the course of the year despite the headline figure showing steady expansion. Growth fell to 1.7 percent in the last quarter, down from 1.8 percent in July-September and 1.9 percent in the previous quarter.

Chinese leaders say they will make the economy more competitive and productive by opening more sectors to private companies but last year's performance still relied heavily on spending by the government and state-owned industry.

Investment by government companies in factories and other fixed assets rose 18.7 percent last year over 2015, according to the National Bureau of Statistics. Investment by private companies was far weaker, growing 3.2 percent.

Real estate sales are booming, which has pushed up economic growth figures. But regulators are taking steps to cool surging housing prices and bank lending, which forecasters expect to depress this year's performance.

Retail sales growth decelerated to 9.6 percent from 2015's 10.6 percent. E-commerce, one of the brightest spots in the struggling economy, soared 26.2 percent over 2015, but that was down from the previous year's 33.3 percent expansion.

This week, the International Monetary Fund raised its China growth forecast for this year by 0.3 percentage points to 6.5 percent, citing a boost from government stimulus. But it warned rising debt increases the risk of a sharper slowdown.

The ruling Communist Party is headed this year into a twice-a-decade change of senior officials. Private sector analysts expect the party to postpone any significant policy changes until that is completed.

"We assume that in 2017, policymakers will be focused on ensuring economic growth remains relatively elevated," said Rafferty. "Determined steps to address excessive debt levels in the economy are unlikely. It will probably not be until 2018, when politics are more favorably aligned, that we begin to see a more radical approach in this area."

You may also like these

EU trade commissioner says trade liberalization...

Jun 18, 2018

European Trade Commissioner Cecilia Malmstrom says trade liberalization continues to have global...

Australian Senate delivers $106 billion in income...

Jun 21, 2018

Australia's prime minister has won a political victory with the Senate passing personal income tax...

Business groups appeal to China over...

Aug 12, 2016

A coalition of 46 business groups from the United States, Europe and Asia has appealed to China to...

Global stocks dip ahead of release of Fed minutes

Aug 17, 2016

Global stocks and the price of oil dipped Wednesday as investors awaited the release of the minutes...

China tightens control of online news after...

Aug 19, 2016

The Chinese government is holding chief editors of news websites personally liable for content...

Search
Financial Markets

About Us

Established in 2015, The Upstocker provides insights on financial reports, commentary, and investment data to traders so that you can make better investment decisions.

Contact us: sales[at]theupstocker.com

Subscribe Now!