China’s economy grows but 2016 weakest in three decades

World’s second-largest economy expanded by 6.8 percent from a year earlier in the three months ending in December.

China cuts interest rates
Trump promised to increase duties on Chinese goods, putting pressure on industries employing millions [EPA]

China’s economic growth picked up in the final quarter of 2016 but its full-year performance was the weakest in three decades as it heads into a potential trade battle with US President-elect Donald Trump.

Trump, who takes office on Friday, has promised to increase duties on Chinese goods, putting pressure on industries that employ millions of workers.

Supported by government spending and a property boom, the world’s second-largest economy expanded by 6.8 percent over a year earlier in the three months ending in December, up from the previous quarter’s 6.7 percent, government data showed on Friday.

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Full-year growth was 6.7 percent, down from 2015’s 6.9 percent – and the weakest since 1990’s 3.9 percent.

“A touch faster growth than expected, but no real change in trend,” Bill Adams, of PNC Financial Services Group, said in a report.

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China’s economy has cooled steadily as communist leaders try to nurture domestic consumption and reduce reliance on trade and investment, but trade still supports millions of jobs. Government spending and a surge in property sales last year helped offset a 7.7 percent plunge in exports, but analysts expect the economy to cool further.

“We do not expect this rebound to extend far into 2017,” Tom Rafferty, of the Economist Intelligence Group, said in a report.

Export industries could face more pressure, raising the threat of politically dangerous job losses, if Trump goes ahead with promises to raise tariffs on Chinese goods.

In an implicit rebuke to Trump, Chinese President Xi Jinping emphatically defended free trade in a speech on Tuesday at the World Economic Forum in Switzerland. He said a “trade war” would harm all countries involved.

Still, a member of the cabinet’s economic planning agency on Friday expressed confidence.

“I am hopeful that after his election, President Trump will consider the issue from the angle of mutual benefit and win-win and will develop the long-term, cooperative ‘big country’ relations that have been formed between China and the United States,” Ning Jizhe told reporters.

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Asked about the potential impact of action by Trump, Ning said China should maintain “medium to high-speed growth”.

Beijing has relied on repeated infusions of credit to prevent activity from slumping too fast, prompting warnings that the run-up in debt could lead to a financial crisis or drag on growth.

Chinese leaders have cautioned that the economic outlook is “L-shaped”, meaning once the downturn ends, growth is unlikely to rebound.

Property sales are booming, which has pushed up economic growth figures. But regulators are taking steps to cool surging housing prices and bank lending, which forecasters expect to depress this year’s performance.

Retail sales growth decelerated to 9.6 percent from 2015’s 10.6 percent. E-commerce, one of the brightest spots in the struggling economy, soared 26.2 percent over 2015, but that was down from the previous year’s 33.3 percent expansion.

This week, the International Monetary Fund raised its China growth forecast for this year by 0.3 percentage points to 6.5 percent, citing a boost from government stimulus. But it warned rising debt increased the risk of a sharper slowdown.

China economic growth

Source: News Agencies