Trade war sees China’s provinces slash growth forecasts for 2019
- Eight provinces have set lower GDP growth targets for this year
- A nationwide slowdown is a likely scenario as trade war starts to bite
From the coastal province of Jiangsu to central Henan, China’s provinces have downgraded their economic growth targets for 2019, as the cold reality of the trade war with the United States continues to bite.
As of today, 12 of China’s 31 province-level divisions had published their annual growth targets, with eight of them reducing their growth targets for the year, according to the South China Morning Post’s review of local government reports.
The country’s most populous province, Henan, home to the world’s largest iPhone factory, is now targeting gross domestic product (GDP) growth of 6.5 per cent, having previously aimed for around 7.5 per cent, according to the provincial government work report released on Wednesday.
Henan joined Jiangsu, a key export hub neighbouring Shanghai, Fujian on the west side of the Taiwan Strait and Anhui, an inland province downstream of the Yangtze River, in toning down their growth forecasts, reflecting the broad-based slowdown across China.
The capital region Beijing also set a lower target. It is now targeting growth in the 6 per cent to 6.5 per cent range, down from 6.5 per cent last year.
The northern industrial port of Tianjin, which was found to have inflated its growth figures in recent years, slashed its 2019 target to 4.5 per cent for 2019 from 5 per cent last year.
The westerly Xinjiang region significantly lowered its growth target for 2019 to 5.5 per cent from 7 per cent last year.
Downbeat outlooks such as these have been rare in recent years in China. Local governments are usually competing to outperform their peers by setting ambitious growth targets.
These adjustments, then, make clear the situation facing China ahead of a national GDP data release on January 21: trade tensions abroad and weakening investor confidence at home make for a bumpy 2019.
The Chinese central government is expected to set a lower growth target of between 6 and 6.5 per cent this year, down from the 6.5 per cent target for 2018, Reuters reported.
Zhu Haibin, chief China economist at JP Morgan, wrote in note this week that the economic slowdown China experienced through 2018 would continue in 2019, despite the fact that Beijing has been tipped to reach a temporary trade truce with Washington before March 1.
“The [stimulus] policy impact could be modest due to the limited scope of policy easing and limitations in fiscal and monetary transmission,” he wrote.
Lu Ting, chief China economist at Nomura International in Hong Kong, wrote that Beijing’s pro-growth policies will have limited success in arresting the slowdown. He predicted that China’s growth will continue to weaken in the first half of the year.
“The market is still too optimistic on the efficacy of the government support,” Lu wrote.
China’s national GDP growth slowed to 6.5 per cent in the third quarter of 2018, the lowest reading in a decade.
The National Statistics Bureau is to release GDP data for the final quarter of last year next week.
The widespread downward revisions by provincial authorities also came as Beijing plans to centralise the calculation of local GDP figures, in a bid to reduce the risk of officials cooking the books. This will come into effect in 2020.
The shift is aimed at closing the gap between national and regional GDP data, which has always contained discrepancies. Traditionally, the sum of China’s provincial GDP readings has always been significantly higher than the nationwide figure.