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China's economy grew at slowest pace in 28 years in 2018

  • Ryan McMorrow

    Agence France-Presse

Beijing, China   /   Mon, January 21, 2019   /   12:14 pm
China's economy grew at slowest pace in 28 years in 2018 A container ship docks at a port in Long Beach, California, the United States. China has the “good faith” to work with the US to resolve trade frictions, the Chinese foreign ministry said on Monday, as the world’s two largest economies resumed talks in a bid to end their trade dispute. (Reuters/Mike Blake)

China's economy grew at its slowest pace in almost three decades in 2018, losing more steam in the last quarter as it battles to quell massive debt and a US trade war, official data showed Monday.

The 6.6 percent growth comes in above the official target of around 6.5 percent and matches a forecast by analysts polled by AFP, but is down from the 6.8 percent chalked up in 2017, according to the National Bureau of Statistics (NBS).

And in a sign of the struggle Beijing faces, growth in the last three months of the year clocked in at 6.4 percent, matching a low seen during the global financial crisis 10 years ago, with economists widely expecting the slowdown to deepen.

"Everyone is widely concerned about the direction of the international situation where there are many variables and uncertain factors," said NBS commissioner Ning Jizhe, noting trade protectionism was in vogue.

"For the world's second-largest economy, where trade accounts for one-third of GDP, this has an impact," he said, adding "downward pressure" on the economy has increased.

The slowing growth prompted Premier Li Keqiang last week to vow the government would not let the economy "fall off a cliff".

Relations with top trading partner the US deteriorated sharply last year after President Donald Trump hit roughly half of Chinese imports with new tariffs in an attempt to force trade concessions.

The trade war is on hold for now after President Xi Jinping and Trump agreed to a three-month ceasefire, with top negotiators set to meet in Washington at the end of this month as a March deadline for a deal looms large.

"China-US economic and trade frictions do indeed affect the economy, but the impact is generally controllable," said Ning.

While analysts say the standoff has dented confidence -- leaving the stock markets battered and the yuan weakened -- they attribute most of the downturn to the government policies to tackle growing debt, financial risk and pollution.

China hit the brakes on major projects such as subway lines and motorways and held off on mountain-moving endeavours to keep a lid on debt last year, with infrastructure investment rising by just 3.8 percent, down from 19 percent the year before.

"Growth is falling at an accelerated pace," Lu Ting, China economist at Nomura, said in a note.

China's exports to US and the world also fell in December, reinforcing the need for its legions of domestic consumers to fuel the economy.

Li last week touted China's "massive market" and vowed to spur on consumption, but the data shows difficulty ahead.

Overall credit growth decelerated every month last year.

"The slowdown in credit growth is causing economic momentum to falter," said Mark Williams, chief Asia economist at Capital Economics, in a note last week.

Slowing disposable income growth and tighter credit has hit consumer spending with car sales falling last year for the first time in more than 20 years.

Retail sales growth slowed to 9.0 percent, down from a 10.2 percent increase the previous year. In December, sales grew 8.2 percent.

Output at factories and workshops ticked up 6.2 percent for the year, down from 6.6 percent in 2017.