Opinion & Analysis

Chinese Economy Hits Its Lowest In 3 Decades

China which is the world’s second-largest economy grew by 6.6% which is slowest in 28 years. As per the latest official data released the economy lost its way further in the last quarter as the county tried to overcome the debt crises and the ongoing trade war with the United States. With that, there is tremendous pressure on the communist leaders to make an amicable settlement with the U.S and end the trade war. The report showed that the growth dipped to its lowest quarterly since the 2008 recession.

The Chinese government is meanwhile implementing measures to enable the country to get more sustained growth through customer spending. However, the customer reaction to this is jittery as they see impending job losses which have made them wary of spending. That has, in turn, prompted the government to increase spending and has even asked banks to reduce interest rates and increase lending so that they can reduce the job cuts. Despite these measures, the growth is expected to go further low as these take time to produce results. Analysts believe that there could be a slowdown again this year and reduce growth to 6.3%. However, if the quarterly growth is taken into account, there was an increase in 1.6 percent from the previous quarter while the analyst has predicted 1.5%.

Oxford Economist Louis Kuijs said in a report that the ‘Growth will remain under pressure’ and that it could get worse if the credit growth and the trade tussle with the US do not end quickly.

The trade war with the US to end soon?

The Chinese government which is already under great pressure after customer spending reduced due to fears of job losses and slowdown are keen on ending the tussle with the US. It can be considered as a sign of progress as Beijing announced that Liu He who is the vice premier and their top envoy of trade would be visiting Washington for bilateral talks that are going to be held at the end of January.  That has prompted economists and analysts to suggest that the talks held at a low-level have made progress and that has made China and American opposite number Robert Lightizer. Trump also indicated that it was ‘going very well’ and a deal could happen very soon.

The key risk to the Chinese economy is if the talks fail yet again and no deal is made then that is a huge downside to the growth.

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