Business Tianjin Magazine - Business English Magazine in China
Written by Helen Friday, 02 August 2019 16:29
Historically low growth levels,
but some sectors are doing well
By Morgan Brady
Main economic growth numbers released from the Chinese Statistical Bureau were a cause for alarm. The country reported the weakest economic growth in 27 years (since 1992). In the second quarter of the current year, the economy grew at a rate of 6.2%, according to the State Council Information Office. Growth in the first two quarters stood at 6.4%.
Analysts expect that the economy will weaken further in the second half. A major factor behind this is the weakening international demand. Despite this, many economists still expect an annual growth rate of over 6 percentage points. Political stability can help to stem the slowdown.
The statistical bureau in China said that the economy is facing a complex situation with increasing uncertainties. There are renewed downward pressures on the economy. The government is expected to increase its intervention. The trade dispute between the US and China has not seen any improvements recently, as no solutions or agreements were reached despite the previous optimism, the media hype, and the recent trade truce.
Performance of different sectors of the economy
Looking at individual sectors, some performed very well. For example, In the first half of 2019, the value added of crop farming grew by 3.9% year-on-year, 0.5% slower than the first quarter. The overall output of summer grain was 141.74 million tons, an increase of 2.93 million tons over last year, up by 2.1%, hitting the highest record as that of 2017. Planting areas of cotton and beans increased.
Industrial production was steady in general, and high-tech manufacturing accounted for a larger share. In the first half, the year-on-year growth rate of total value added of the industrial enterprises above the designated size was 6.0%. The value added of the state holding enterprises went up by 5.0% year-on-year; that of share-holding enterprises up by 7.3%; and enterprises funded by foreign investors or investors from Hong Kong, Macao, and Taiwan up by 1.4%.
Services sector maintained growth
The services sector also grew well maintaining its good momentum. The value added of information transmission, software, and information technology services, and the value added of leasing and business services, of transport, storage and postal services, and of financial intermediation grew by 20.6%, 7.8%, 7.3%, and 7.3% year-on-year respectively in the first half.
Online sales flourishing
Online retail sales also maintained growth, as in the first half of 2019, the total retail sales of consumer goods reached 19,521.0 billion yuan, up by 8.4% year-on-year.
Imports and exports also grew
Imports and exports grew slightly, as the total value of imports and exports of goods was 14,667.5 billion yuan, a year-on-year increase of 3.9%. The total value of exports was 7,952.1 billion yuan, up by 6.1%; the total value of imports was 6,715.5 billion yuan, up by 1.4%.
Producer price index
The producer price index for means of production decreased by 0.3%. As for the components, producer prices for mining and quarrying industry increased by 4.5%, prices of raw materials industry decreased by 2.1%, and prices of manufacturing and processing industry remained unchanged from the previous year. As for consumer goods, producer prices for consumer goods increased by 0.9% year-on-year.
Government intervention is likely
While the growth in most sectors was positive, international pressures are still noticeable. Most central banks around the world are anticipating global slowdown and turning to their dovish monetary policy tools to stimulate their economies. The slowdown will likely affect the export-based businesses of China. As for the trade spat pressures, many factories have moved out of China to adapt. Yet, much remains to be done.
Analysts have said that the People’s Bank of China still has room to act. It can provide stimulus to the economy to ensure steady growth, or at least ensure that the economy does not slow down very quickly. Many expect that the Chinese government will not allow the quarterly growth to fall below 6.0%, especially that Chinese President Xi Jinping last year said that the 70th anniversary of the People’s Republic of China in 2019 would be celebrated with outstanding economic performance.
Growth numbers are at historically low levels, yet, many sectoral indicators appear to be healthy. The Chinese government still has much room to manoeuvre and remain on track to achieve its ambitious growth goals. However, the global economic environment appears to be challenging, which can make the government’s task harder. The US is not budging on its demands when it comes to resolving the trade war. This is causing tensions among investors and weighing down on global economies. Asian economies are usually the first to take a hit when this happens, as they are densely connected with the Chinese economy. Nonetheless, for now, it is still early to question the resilience of the second largest economy in the world.