China GDP Drops To A Near Thirty Year Low

By Glenn Dyer | More Articles by Glenn Dyer

China’s central bank governor has ruled out any change in monetary policy less than a day after the country’s third-quarter GDP fell to a 6% growth rate – the lowest in almost 30 years.

Economists blamed the Donald Trump-driven trade war, cooling global trade and weak manufacturing and investment sentiment for the weak figures, which were slightly lower than analysts’ expectations, showed.

The weak figures saw the National Australia Bank cut its growth forecast for 2019 to 6.1% (from 6.25% previously), “while growth in 2020 is forecast at 5.9% (compared with 6.0% previously).”

The growth rate was at the bottom of the government’s 2019 growth range of 6% to 6.5% and was driven (according to analysis from the NAB) “by China’s secondary sector – manufacturing and construction – with conditions in the former significantly weaker as a result of the US-China trade war. This sector grew by 5.2% YoY in Q3 (compared with 5.5% previously).

“In contrast, China’s services sector has recorded fairly stable growth – increasing by 7.0% YoY in Q3 – the same rate of growth recorded in the March and June quarters,” NAB analysts said at the weekend.

Some analysts suggested the weak performance could see more action from the central bank after the recent cut in the bank reserve assets ratio and cut a tiny amount off a key lending rate, but Governor Yi Gang made it clear in comments on the People’s Bank of China website there would be no change in the current policy stance.

Western media reports said he said the central bank will continue to implement prudent monetary policies and create an appropriate financial environment for high-quality economic growth.

Yi also said that China’s economic growth remains basically stable, despite facing downward pressure. The yuan currency is basically stable and credit is growing at a steady pace, he said.

Yi made the remarks during a G20 meeting in Washington held on Thursday and Friday, according to the statement which was released on Saturday.

The 6% rate was the lowest since 1992 and came despite slightly better figures for industrial output, urban investment and retail sales in September.

China’s industrial output grew 5.8% year-on-year in September, recovering after slowing sharply the previous month, according to the monthly report from the National Bureau of Statistic on Friday

Analysts had expected industrial output to grow by 5.0% in September so the much higher rate of expansion came as a big surprise.

Crude steel fell from August but was up on September 2018. The fall was due to production curbs in northern China ahead of the October 1 celebration of China’s 70th birthday. The curbs in and around Beijing and several other major cities was to allow smog to clear.

Retail sales rose by 7.8% year-on-year last month, in line with analysts’ expectations of 7.8% growth. That was up slightly from the 7.5% rate in August.

Fixed asset investment grew 5.4% from January-September, matching forecasts and faster than the multi-year low of 4.8% in August.

Chinese property investment grew 10.5% year on year in September, boosted by a higher construction starts, which rose to a 6.7% rate.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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