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Montevideo, May 19th 2019 - 12:31 UTC

China's growth stabilizes 6.4% year-on-year in first quarter

Thursday, April 18th 2019 - 09:40 UTC
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In the first quarter of 2019, GDP resisted and even grew more than the average forecast of 12 analysts surveyed who expected 6.3%. In the first quarter of 2019, GDP resisted and even grew more than the average forecast of 12 analysts surveyed who expected 6.3%.

The growth of the Gross Domestic Product (GDP) in China stabilized 6.4% year-on-year in the first quarter of 2019, despite falling global demand and the trade war with the United States. The figure was announced on Wednesday by the National Bureau of Statistics (BNS), along with other rather optimistic indicators on the health of the world's second largest economy.

“The national economy showed a stable performance, with more positive factors” that encouraged “a reinforced market confidence,” said Mao Shengyong, a SNB spokesman. In 2018, growth slowed down quarter after quarter (6.8%, 6.7%, 6.5%, 6.4%), in a context of efforts by the authorities to reduce debt and trade tensions with the administration of US President Donald Trump. But in the first quarter of 2019, GDP resisted and even grew more than the average forecast of 12 analysts surveyed who expected 6.3%.

”Keeping in mind the slowdown in world economic growth and international trade, the growing international uncertainties and the important internal structural problems (...) the downward pressure of the economy persists,” said Mao Shengyong, however.

To support the real economy, the Chinese government committed in March to reduce the fiscal pressure and social contributions to companies by nearly two trillion yuan (265,000 million euros). At the same time, the Chinese government is trying to give support to companies that need credit but without overincreasing the country's global debt, which is already 155% of GDP, according to the OECD.

That is why the authorities encourage Chinese banks to increase their loans to small and medium-sized companies, hitherto forgotten to the detriment of large state groups, in many cases unprofitable.

“With the increase in loans accelerating and the market moment improving, the Chinese economy will grow again when it has reached its lowest point, which may be the case,” says Julian Evans-Pritchard, an economist at the consultancy Capital Economics.

In turn, unemployment in China announced a growth target of between 6% and 6.5% this year, after the 6.6% registered in 2018, its lowest level in 28 years. Despite this more modest goal, the urban unemployment rate, a crucial factor in maintaining social stability, fell slightly from February to March, from 5.3% to 5.2%. China tries to continue with the stabilization of its economy, to the detriment of its heavy industry and favoring domestic consumption. In this sense, retail sales remained stable in the first quarter (8.2% year-on-year), announced the BNS. A good figure taking into account that the same period fell exports, a sign of the weakness of global demand.

Another positive factor is the increase in investments in fixed capital -6.3% year-on-year in the first quarter-a little more than between January and February (6.1%). On the other hand, industrial production recorded a stronger growth, of 6.5% year-on-year in the first quarter, 1.2 points more than in relation to January-February. With an economy that seems to be stabilizing, analysts warn that the Chinese government could stop taking stimulus measures.

“The central bank seems to be more cautious,” says Raymond Yeung, of the ANZ bank. “We believe that those who decide will reassess the need for supplementary stimulus measures,” he said in a note. In parallel, the trade war between China and the United States, which for a year has affected the Chinese economy, seems close to a solution after nine high-level meetings between negotiators from both powers.

However, there is still no date for the signing of an agreement between US President Xi Jinping and his counterpart Donald Trump. The two countries mutually impose tariffs on products worth 360,000 million dollars per year.

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