China growth slides to new 26-year low
China’s growth slipped to its slowest rate in more than a quarter of a century in 2016, an AFP survey has forecast, as analysts see mounting risks for the world’s number two economy with Donald Trump heading for the White House. While the Asian giant is a key engine of the global economy, affecting businesses and employment across the planet, its leaders are trying to shift from reliance on exports and infrastructure investment as a growth driver to consumer spending.
But the transition has proved bumpy, with the crucial manufacturing sector struggling in the face of sagging global demand for the nation’s products and excess industrial capacity left over from an infrastructure boom. Added to that is a volatile yuan, large-scale capital flight and a mounting concerns about a rapid surge in debt levels after Beijing flooded the market with credit to maintain growth in the face of a sluggish global economy.
And now Beijing has another headache with Trump threatening massive tariffs on Chinese goods over what he sees as unfair trade practices and calling it a currency manipulator. The economy expanded 6.7 percent last year, according to the median projection in an AFP survey of 23 economists. That compares with 6.9 percent in 2015 and is the weakest since 1990, a year after the bloody Tiananmen Square crackdown isolated the country internationally. The forecast is within the government’s target of 6.5-7.0 percent. Official figures are released Friday.
“For China’s economy to transform from investment-led to consumption-led without relying too much on credit, a slowdown is necessary,” said Claire Huang of Societe Generale. While there are concerns growth will slow further, Chinese President Xi Jinping is looking to claim the mantle of global economic leadership many expect an increasingly protectionist Trump to give up.
On Tuesday Xi pushed the cause of globalization during his debut at the World Economic Forum in Davos, warning protectionism was akin to “locking oneself in a dark room”. While the median projection for 2017 in AFP’s survey came in at 6.5 percent, two of those questioned warned it could drop as low as 6.0 percent.
Reforms still needed
A cooling real-estate sector will be “the largest drag”, Brian Jackson of IHS told AFP, noting expectations of a “fairly painful” cyclical downturn in the housing market. China last month ended a major annual economic meeting with promises to liberalise investment in state-owned sectors, control real estate speculation and improve the “flexibility” of the yuan. But Societe Generale’s Huang warned further slowing could test Beijing’s commitment to reform. —AFP