With 2019 already in the history books, China has suited its economic balance sheet. Its GDP grew last year by 6.1%, the rate lowest in 29 years, which attests to both the progressive slowdown of the asian giant as the vertiginous speed in the past few decades. 2019 the year was less dynamic since 1990, when the social and political instability subsequent to the Tiananmen massacre reduced the growth to 3.9%. The episode, which occurred in may of 1989, also affected the growth of the previous year (4.2 per cent). Ignoring both of them results, to find a data lower than the published this Friday have to go back 38 years, to 1981, when GDP advanced 5.1%.
The data of the fourth quarter, published this Friday by the National Bureau of Statistics, was the missing piece to complete the mural of the year. Between October and December the chinese economy marked a 6%, rate identical to that of the third, which is a repetition of the lowest result since 1992, the chinese authorities began to make public the quarterly evolution. It is not necessary to go back very far back to find the previous minimum: this corresponds to the second half of 2019, when activity rebounded 6.2%.
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Although it represents another step downward in the historic series, the data of 2019 to comply with the forecasts of the Government, which had set its ambitions between 6.5% and 6%. Thus, China remains on the path that will allow you to achieve the goal of doubling its size by 2020 compared to a decade ago. The data are also in line with the forecasts of the International Monetary Fund and the World Bank.
“6.1% fits with the trend of the development of our economy, that goes through a gradual decrease of the rate of growth. It is not easy to achieve a rate of 6.1% while the rest of the world is in negative projection”, pointed to by phone Hongcai Xu, chief economist at the Chinese Center for Economic Exchange Internationally. “In addition, our efficiency is advancing: the employment data are positive, the CPI and the financial markets maintain their stability, the balance of payments is balanced… In general, the chinese economy continues to make progress with strength”.
GDP of China
Growth per year
15%
14,2
12
9
6,1
6
3,9
3
0
91
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THE COUNTRY
GDP of China
Growth per year
15%
14,2
12
9
6,1
6
3,9
3
0
91
93
95
97
99
01
03
05
07
09
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Prev.
THE COUNTRY
GDP of China
Growth per year
15%
14,2
12
9
6,1
6
3,9
3
0
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
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THE COUNTRY
Other data released Friday also show a positive reading on this giant world. The retail sales, the key index for assessing the costs of consumers in a country that seeks to foster domestic demand, grew by 8% in 2019, a percentage point less than in 2018. Industrial production, gauge of chinese manufacturing, advanced 5.7% in the last year, above expectations but also less than the previous one (6.2 per cent).
Truce commercial
China has been rocked this year by the trade war with the U.S., although the future could be rosy. This Wednesday, both countries signed the first phase of the agreement, which, although does not solve the conflict in a definitive way, it assumes at least a truce.
The text signed by the president, Donald Trump and the deputy prime minister, Li I, right hand of Xi Jinping on economic policy and leader of the negotiating team to the chinese, states that Beijing will deepen the opening of its domestic market, will increase the import of raw materials and improve the protection of the prorld intellectual property organization. The U.S., for its part, undertakes not to raise tariffs current on products valued at 323.000 million euros, which, however, remain in force. “China has made more commitments than we thought likely a few months ago, changing relatively little on the part of EE UU”, detailed in a report Mark Williams, chief economist for Asia of Capital Economics. “It is likely that China will not fulfil its promises, but that may not amount to long-term success of the negotiations”, he adds.
The thorniest issues of the conflict, such as cyber security or the lack of reciprocity for u.s. companies on chinese soil, are pending in a second phase, according to Trump, will be the last. Flutter also in the vicinity of the conversation, the future of the technology Huawei, which has faced since may to a veto of the administration of U.S. represent a supposed threat to national security.
In the opinion of the economist Xu, “the agreement would partly reduce the tensions between the two countries: this is already a good news.” This achievement marks its forecast for this year: “Our domestic demand, investment and consumption will remain stable, so that in 2020 we will see a growth of 6%, in line with the IMF’s forecasts, just one tenth below the figure this year”. Meng Rui, professor of Finance at the school of business China-Europe, coincides in its forecast, while noting that the greatest threats will pass by “high leverage, overcapacity industrial and a hypothetical weak consumption”.
Dodging the middle-income trap
The middle-income trap describes a scenario in which a country that has lived through a stage of growth is obstructed in a development intermediate after losing their competitive advantage, precisely as a result of its growth. Some classic examples of this model are Brazil and south Africa today, or Argentina after the second World War. The fingers of the analysts now point to China, whose Government seeks to escape from this threat with a bet by the technological innovation within the framework of the campaign Made in China by 2025.
“China will not fall into the trap of the average income, at least at its lowest levels,” says Alicia Garcia Herrero, chief economist of Natixis. “A more likely scenario happens that your economy stops converging with the U.S. in the decade of the 30,” he adds. So pointing to a World Bank report that projected a growth of china’s GDP of 1.7 per cent between 2031 and 2040. “Then China will be the first economy in the world. Will age and will be more similar to the japanese, but with a much larger size. It will be much less productive and, therefore, will experience problems of distribution of income. The social inequality will worsen, unless the Government put in place a wellness policy to the european, which will not be easy given the high levels of debt,” concludes García Herrero.
