China’s economy grew at slowest pace in nearly 30 years in 2019

China’s economic growth slowed to its weakest rate in nearly 30 years in 2019 amid a bruising trade war with the United States and sputtering investment, and more stimulus steps are expected this year to help avert a sharper slowdown.

Fourth-quarter gross domestic product (GDP) – the sum of all finished goods and services produced within a country’s borders – rose by 6.0 percent from a year earlier, data from the National Bureau of Statistics showed on Friday, in line with expectations and steady from the pace in the third quarter.

That left full-year growth at 6.1 percent, the slowest rate of expansion China has seen since 1990. Analysts had expected it to cool from 6.6 percent in 2018 to 6.1 percent.

While recent data have pointed to some signs of improvement in the ailing manufacturing sector, and a newly-signed China-US trade deal has helped revive business confidence, analysts are not sure if the gains can be sustained.

“We need to look beyond the official headline numbers to the significant headwinds facing the economy,” said Diana Choyleva, chief economist at research firm Enodo Economics, in a note emailed to Al Jazeera.

“These include rising unemployment, depressed consumer spending and private investment and growing financial risks as the deleveraging and de-risking campaign enters a critical phase among increasing stress in the financial system,” Choyleva added.

But other analysts are less gloomy about the prospects for China’s economy, 

“The outlook for 2020 is for continued resilient growth, boosted by the Phase One trade deal with the US and the continued positive impact of government monetary and fiscal policy stimulus measures,” Rajiv Biswas, Asia Pacific chief economist at research firm IHS Markit told Al Jazeera.

Moderately prosperous

As part of the agreement, China committed to purchases of at least an additional $200bn in US goods and services over two years, while the US has suspended or is reducing some tariffs on Chinese goods.

This year is crucial for the ruling Communist Party to fulfil its goal of doubling GDP and incomes in the decade to 2020 and turning China into a “moderately prosperous” nation.

Even with additional stimulus and the trade war truce, economists polled by Reuters expect growth will cool further this year to 5.9 percent.

Policy sources have told Reuters that Beijing plans to set a lower economic growth target of about 6 percent this year from last year’s 6-6.5 percent, relying on increased infrastructure spending to ward off a sharper slowdown.

On a quarterly basis, the economy grew 1.5 percent in October-December from the previous three months, in line with expectations. It also steadied.

December data released along with quarterly GDP showed a surprising acceleration in factory output and investment growth, while retail sales grew at a steady, solid pace, suggesting the economy ended the year on a firmer note.

Industrial output grew 6.9 percent in December from a year earlier, the strongest pace in nine months. Analysts had expected growth to dip to 5.9 percent from 6.2 percent in November.

Fixed-asset investment rose 5.4 percent for the full year, versus expectations for a 5.2 percent increase, the same as in the first 11 months of the year.

Retail sales rose 8.0 percent in December on-year, compared with forecasts for 7.8 percent and November’s 8.0 percent.

Real estate investment rose 9.9 percent in 2019 from a year earlier, slowing slightly from a 10.2 percent gain in the first 11 months of the year.

Beijing has been relying on a mix of fiscal and monetary steps to weather the current downturn, cutting taxes and allowing local governments to sell huge amounts of bonds to fund infrastructure projects.

Banks also have been encouraged to lend more, especially to small firms, with new yuan loans hitting a record 16.81 trillion yuan ($2.44 trillion) in 2019. But the economy has been slow to respond, and investment growth has slid to record lows.