China Econometer – December 2019
Monday, 13 January 2020 07:24
Acute balancing act as China seeks to ensure steady growth dynamic
Although China largely managed to achieve its 2019 growth objectives, risks associated with a high reliance on debt-fuelled growth and other forms of stimulus and are becoming more pronounced. These include increasing credit defaults, corporate bankruptcies and the shedding of jobs. However, with GDP settling to an annual growth rate of around 6.3 percent in 2019, representing an almost 30-year low, it is unlikely that stimulus measure will be ratcheted back as yet. As the economy continues its slowdown and uncertainties around trade and technology tensions continue into 2020, maintaining steady growth will require a measured approach by key government players.
Key Economic Indicators
In November China’s consumer price index (CPI) grew at its fastest rate since January of 2012, rising by 4.5 percent. Constraints on pork supply is the primary driver of this increase as pig herds in China continue to be hit by African Swine Fever. While this is expected to affect monetary policy, a broader inflationary shock is unlikely. The November producer price index (PPI) slid in the other direction, falling 1.4 percent year-on-year. The downward pressure on the price of goods in the PPI basket underscores persistent weak demand, particularly in oil and gas extraction and chemical fibre producing sectors.
PMI thwarts poor outlook, returns to growth
China’s purchasing manager’s index (PMI) flouted modest projections as the year drew to a close, returning to expansion levels in November at 50.2. This comes as the contraction in October, when the PMI stood at 49.3, was expected to extend to the end of the year. This expansion was primarily driven by increased domestic demand which primarily derived its buoyancy from a surge in new orders and an acceleration in factory output. Stimulus measures taken by the government aimed at achieving steadier growth are largely responsible for this result. This has served to counteract the continuing decline of new export orders amid ongoing trade tensions with the US.
China’s values as a key global player reaffirmed at Guangzhou Forum
China’s efforts to foster a more prosperous future for both itself and the global community as a whole were reaffirmed by President Xi Jinping at the 2019 Imperial Springs International Forum held in Guangzhou in December. This was underscored by a reiteration of China’s commitment to values like multilateralism, openness and shouldering its responsibilities as it continues to pursue its current developmental trajectory. The forward-looking, future-oriented stance consistently taken by China’s leadership is evidence of its prioritisation of improved outcomes globally.
This article is produced by The Beijing Axis and is published in The Econometer section of ChinAfrica magazine (January 2020), an English and French language monthly publication that provides news, views and analysis on all things China, Africa and China-Africa relations.