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China to hit 2019 economic targets as trade deal lifts outlook

The preliminary trade deal just signed by the U.S. and China is set to reinforce the stabilizing momentum of the Chinese economy, with data due Friday likely to indicate some government success in braking the slowdown toward the end of last year.

Gross domestic product growth figures for the fourth quarter and the full-year are due for release at 10:00 a.m. Beijing time Friday, along with investment data for the year, plus industrial output and retail sales numbers for December.

The country grew at more than 6% last year and January data is showing a better outlook , Vice Premier Liu He said in Washington this week, according to Xinhua. Chinese Premier Li Keqiang told a State Council meeting Monday that the nation would meet its primary economic targets in 2019 of growth of between 6% to 6.5%, with economists expecting the result to come in at 6.1%. When the national legislature meets in March, analysts expect the goal to be tweaked to “around 6%” for 2020.

It’s no surprise that China will meet its targets, which are as much a political statement as a forward estimate for the economy. Of more immediate interest will be the data on industrial output, consumption, and investment which will give a more detailed read on what’s happening under the hood. Other data released this week showed imports declined almost 3% in 2019 from the year before amid weak domestic demand, though a rebound in December is a sign of a cyclical recovery.

“We believe China’s economy performed better in the fourth quarter than the previous one and it’s highly likely the full-year growth rate will be higher than 6%,” said Ding Shuang, chief economist at Standard Chartered Bank Ltd. in Hong Kong. The consensus for the fourth quarter expansion is 6%.

China’s transition to a consumption-led economy has been uneven, and that’s visible in sluggish retail sales growth. Consumption contributed about 61% of economic expansion in the third quarter of last year, down from a peak of near 80% in mid-2018.

Retail sales growth is forecast to have slowed slightly in December, with some economists citing a pullback in sales following the Singles’ Day promotion in November, although continued strong inflation might offset a drop in actual sales.

However, fixed-asset investment likely held up in the fourth quarter, and may pick up into 2020, with the government rolling out a slew of measures to boost infrastructure investments aimed at prioritizing growth stabilization for 2020. More so-called “special bonds” aimed at a funding infrastructure will be issued this year, though the government is also trying to reduce the debt on the balance sheets of various levels of government.

More on the bond sale plans

Looking ahead in 2020, this week’s trade deal may help the economy, both by increasing exports and raising domestic confidence and investment. The People’s Bank of China is expected to continue with a moderately accommodative monetary policy, with little indication that large-scale stimulus is on the way.

Bloomberg
Bloomberg

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© Bloomberg
The author’s opinion are not necessarily the opinions of the American Journal of Transportation (AJOT).

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