As a result of the tariff dispute with the Trump administration, China's economic growth fell to a three-decade low in 2018. The country's economy increased only by 6.6% over 2017. Also, the growth of the last three months of 2018 stopped at 6.4% from the Q3's 6.5% increase.
As reported by The Economic Times, communist leaders are trying to steer China to slower, more self-sustaining growth based on consumer spending instead of trade and investment. But the slowdown has been sharper than expected, prompting Beijing to step up government spending and order banks to lend more to shore up growth and avoid politically dangerous job losses.
"Growth will remain under pressure in the coming months," Louis Kuijs of Oxford Economics said in a report. "Key risks are the ongoing trade tension with the U.S. and that credit growth does not recover."
Economic activity held up through most of 2018 despite President Donald Trump's tariff hikes on Chinese imports in a fight over Beijing's technology ambitions. But exports contracted more sharply than forecast in December as the penalties began to depress demand. Growth in 2018 was the lowest since 1990's 3.9 percent in the aftermath of the violent crackdown on pro-democracy protests centered on Beijing's Tiananmen Square the year before.
Trump stated that trade relations with China were "going very well" and "a deal could very well happen."
Forecasters expect growth to decline further this year to 6.3 percent or lower. They predict the decline will bottom out this year as Beijing's stimulus efforts gain traction. However, they have pushed back the time frame for that due to weakening exports.
Chinese leaders warned earlier any recovery would be "L-shaped," meaning companies and investors shouldn't expect growth to rebound to the previous decade's double-digit levels.
"A key downside risk to the Chinese growth outlook will be if the U.S.-China trade war escalates, should the temporary truce expire without any trade deal being struck," Rajiv Biswas of IHS Markit stated.