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Hit hard by the trade war, China’s economic outlook is uncertain – except for one thing: growth is sure to decline
- Already grappling with its own deleveraging campaign, rising inflation and an ageing population, China is reeling from US tariffs that strike at the heart of an economy whose explosive growth was grounded in free trade and globalisation
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Why you can trust SCMP
China has moved far from its Mao-era command economy, following four decades of market-oriented reform. But in the Communist Party-led state capitalist system, state planning – a remnant of Stalinist economics – continues to play a critical role.
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China has annual, five- and 10-year economic programmes, which, in addition to being forward-looking economic plans, are used to measure the government’s performance. Faced with an uncertain economic landscape, China’s planners are preparing for a rockier 2020.
The rate of the country’s economic growth has been slowing in the past decade, a trend that accelerated after the trade war with the US gathered steam last year. The economy grew at 6.8 per cent, 6.7 per cent, 6.5 per cent and 6.4 per cent in each quarter of 2018, an average quarterly deceleration in growth of 0.1 percentage point.
In 2019, the economy grew 6.4 per cent in the first quarter, 6.2 per cent in the second and 6 per cent in the third, a 0.2 percentage point average quarterly decline in the growth rate.
The market consensus is that growth will dip below the politically sensitive and psychologically important 6 per cent mark next year, with the slowdown showing no signs of abating.
The decline in China’s growth rate comes at the worst time as policymakers are also fighting a battle against rising debt and inflation, which constrains their efforts to prop up demand and stimulate growth.
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