China's economy slumps to 6.1% in 2019, lowest in 29 years; weak domestic demand, trade war with US take toll on world's second-largest economy

  • The new data released by the National Bureau of Statistics comes a day after China and the US signed a long-awaited phase one deal

  • In 2018, China's economy sank to a 28-year low slowing down to 6.6% year on year, lower than the 6.8% growth registered in 2017

  • Chinese economy was hit hard by the US tariffs as a result of the trade war between the two countries

Beijing: China's GDP grew by 6.1 percent last year, the lowest in 29 years, the government said on Friday, as weak domestic demand and the bruising 18-month trade war with the US took their toll on the world's second-largest economy.

The new data released by the National Bureau of Statistics (NBS) comes a day after China and the US signed a long-awaited phase one deal, marking a ceasefire in the 18-month-long trade war which saw the world's two largest economies slap 25 percent tariffs on about half a trillion-dollar worth of each other's exports.

The world's second-largest economy grew by 6.1 percent last year, its worst performance since 1990, but it remained above the psychologically important six percent mark. The Gross Domestic Product (GDP) growth remained well within the 6 to 6.5 target set by the government, the NBS said.

 Chinas economy slumps to 6.1% in 2019, lowest in 29 years; weak domestic demand, trade war with US take toll on worlds second-largest economy

Representational image. Reuters

However, significant from the Chinese government's perspective, the GDP expanded to $14.38 trillion from last year's $13.1 trillion.

In 2018, China's economy sank to a 28-year low slowing down to 6.6 percent year on year, lower than the 6.8-percent growth registered in 2017 as it grappled with the continued slowdown amid the trade war with US and declining exports.

There is a sense of relief among the officials here as the official growth rate remained above the psychologically important 6 percent as mandated by Chinese President Xi Jinping who in the past directed that GDP should not go down below six percent, which could cause serious disruption to the world's second largest economy.

Chinese economy was hit hard by the US tariffs as a result of the trade war between the two countries.

After signing the phase one deal on Wednesday, US President Donald Trump said 25 percent tariff hike on $360 billion worth of Chinese products would continue until the phase-2 deal is worked out.

"The phase one deal is only an interim agreement between China and the US. In fact, to push for negotiation in the next stage, the US will keep existing tariffs on imports from China unless the two countries manage to reach a phase two deal," said Alicia Garcia Herrero, chief Asia Pacific economist at Natixis.

"In the bilateral evaluation and dispute resolution chapter, the agreement also makes it clear that, if the concerns cannot be resolved, the two parties hold the right to suspend an obligation, adopt a remedial measure, or in the worst case, withdraw from the agreement," he told the South China Morning Post.

Despite falling to a new low since 1990, when political turmoil drove economic growth down to 3.9 percent, the 6.1 percent rate met the target range of between 6.0 percent and 6.5 percent set by the central government at the beginning of last year, but was below the market expectation of 6.2 percent.

The headline figure was in line with forecasts of the International Monetary Fund and the World Bank for China's economic growth this year, the Post report said.

Chinese officials say consumer spending has increased showing success of China's efforts to rejig its economy from one based on exports to more reliant on consumer spending.

According to the NBS data, China's per capita disposable income stood at 30,733 yuan ($4,461.95) in 2019, up 5.8 percent year on year in real terms.

Chinese per capita consumer spending increased by 5.5 percent year on year in real terms to reach 21,559 yuan in 2019, the data said.

By 2020, China aims to double the per capita income of its urban and rural residents from 2010 levels.

China's value-added industrial output, an important economic indicator, expanded 5.7 percent year on year in 2019, slowing from 6.2 percent growth in 2018.

The growth rate was higher than that in the first 11 months of 2019, the data said.

In December alone, China's industrial output expanded 6.9 percent year on year, up 0.7 percentage points from November, state-run Xinhua news agency quoted the data as saying.

China's fixed-asset investment (FAI) increased 5.4 percent year on year in 2019, 0.2 percentage points higher than the level recorded in the first 11 months.

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Updated Date: Jan 17, 2020 14:43:51 IST