China’s Annual Growth Slows


The Chinese economy is the second largest in the world, but it is still nominally the controlled economy of a communist state. The economic data which China released has always been treated with a pinch of salt if it cannot be independently verified.

If you believe the headlines, China is in a bad way since last year’s annual growth was the weakest in nearly three decades – surely, Trumps policy of a trade war is bearing fruit, well maybe, maybe not. The 2018 annual growth figure China posted would make any other leading economy green with envy. After its worst economic output since 1990, China still managed growth of a whopping 6.6%. Many western nations would love to have such a growth headache.

If the data from China was absolutely accurate, one would expect a gradual tailing off of growth as the value of the economy increases. According to the data, China’s GDP has more than doubled since 2010 from $6.1 trillion to $12.4 trillion in 2017 – so to achieve growth of 5% in 2010, the economy had to expand by $3.05 trillion; now this level of growth requires it to expand by $6.2 trillion. Another striking feature of China’s economic growth profile is that it managed not to take a hit during the Global Financial Crisis!

The investment community is concerned that public debt in China may be at unsustainable levels. Fears that the China-US trade dispute will harm already slowing global demand also means that the data (such as it is) is closely scrutinised. The Q4 GDP figure came in at 6.4%, down from 6.5% in Q2 2018 which indicates a slowing economy (the data is on a year-on-year basis).

China continues in its attempts to rebalance its economy away from dependency on exports by stimulating domestic demand. This has involved tax cuts and increased spending on infrastructure projects. The liquidity requirements for Chinese banks have also been relaxed.

Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.