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China economy
This Week in AsiaOpinion
Cary Huang
Cary Huang

Sino File | China’s economy is slowing, but it has the keys to future growth

  • The third-quarter economic growth rate of 6 per cent is the slowest since Beijing began publishing such data in the first quarter of 1992
  • Free-market reform and opening up its economy are the two most critical and interconnected issues as it looks to its future development

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Workers dismantle an advertising hoarding in Beijing. The International Monetary Fund has cited US-China trade tensions as a driving factor for “sluggish global growth”. Photo: AFP
Cary Huang
China’s third-quarter economic growth of 6 per cent is not only the slowest rate since Beijing began publishing such data in 1992, it also suggests the economy is right at the bottom of the central government’s full-year growth target of between 6 per cent and 6.5 per cent.
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The dim economic report for the July-September period came on the heels of gloomy forecasts by international institutions, with the International Monetary Fund citing US-China trade tensions as a driving factor for such “sluggish global growth”. Uncertainty over global trade and the global economy was at its highest point in more than 20 years, the Institute of International Finance said recently, citing the latest readings of the World Uncertainty Index and the World Trade Uncertainty Index.

That the growth of the world’s second-largest economy has decelerated at a quarterly rate of 0.2 percentage points this year – after slowing from the first quarter’s 6.4 per cent annualised growth to 6.2 per cent in the second quarter – may have made a significant contribution to the moribund global prospects. The latest Chinese economic report may indicate that the economy is heading towards the politically sensitive benchmark of under 6 per cent in the final quarter of this year and in 2020, as there are no signs the slowdown will abate.

A breakdown suggests growth across the board cooled in the third quarter, despite some recoveries in industrial production and retail sales. The actual growth slowdown might be worse than the official numbers, as nominal GDP growth – which is more relevant for investors – dropped to 7.6 per cent year-on-year in the third quarter from 8.3 per cent in the second. Nominal GDP growth was 9.7 per cent for the whole of last year.

Employees work on the production line of a robot vacuum cleaner factory in Shenzhen, China. Photo: Reuters
Employees work on the production line of a robot vacuum cleaner factory in Shenzhen, China. Photo: Reuters
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The notable deceleration of growth momentum in the third quarter may spark a more rapid deceleration in aggregate demand growth, despite the government’s stimulative policy support initiatives for the economy since the middle of last year, which include major tax and rate cuts, boosts to bank lending and massive investment in infrastructure projects.

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