China’s economic growth sank to a new multi-decade low in 2019 as Beijing fought a tariff war with Washington, but forecasters said a US-Chinese trade truce might help to revive consumer and business activity.
The world’s second-largest economy grew by 6.1 per cent, down from 2018’s 6.6 per cent, already the lowest since 1990, government data showed on Friday. Growth in the three months ending in December held steady at the previous quarter’s level of 6 per cent over a year earlier.
Oil prices were steady on Friday as reports of sluggish economic growth in China, the world's biggest crude importer, raised concerns about future fuel demand.
"A well-expected fourth-quarter China GDP rate provided little clue for oil price trading on Friday morning and mounting downward economic pressure will perhaps limit oil's upside in the mid- to long-term," Margaret Yang, market analyst at CMC Markets.
Brent crude futures were 1 cent higher at $64.63 a barrel, after gaining nearly 1 per cent on Thursday. Whereas, the US West Texas Intermediate futures rose 2 cents at $58.54 a barrel, having risen more than 1 per cent the previous session.
On Wednesday, business sentiment received a boost after signing of an interim deal in the costly war over Beijing's technology ambitions and trade surplus.
The Trump administration agreed to cancel planned tariff hikes on additional Chinese imports and Beijing promised to buy more American farm goods, though punitive duties already imposed by both sides stayed in place.
The Chinese downturn might not have bottomed out yet, but improved activity in December suggested the cooling of tensions might be encouraging companies and consumers to spend and invest, private sector economists said.
The agreement is a signal that the situation is unlikely to deteriorate, said Chaoping Zhu of JP Morgan Asset Management in a report.
“Corporate confidence keeps improving,” he added. That might help to “provide strong support” to economic growth.
Chinese exporters have been battered by the US President Donald Trump's tariff hikes, but a bigger blow to the economy came from weakness in consumption.
Households, spooked by the trade war and job losses, put off big purchases. Auto sales fell for second year in 2019, tumbling 9.6 per cent. Growth in retail spending decelerated to 8 per cent over a year earlier, down from 8.2 per cent in the first nine months of the year.
The economy faces “downward pressure” and “instability sources and risk points” abroad are increasing, the government said in a statement.
The trade war adds to pressure on Chinese leaders who also are struggling to shore up growth and rein in surging food costs.
Chinese exports ended 2019 up 0.5 per cent despite the tariff war and weaker global demand.
Manufacturers stepped up efforts to sell to other markets, recording double-digit gains in exports to France, Canada and other economies.
“Sluggish global growth will continue to challenge the external outlook, but we expect the phase one deal with the US to have a favourable impact on exports and support domestic sentiment and confidence,” said Louis Kuijs of Oxford Economics in a report.
2019 economic growth came in at the low end of the ruling party’s official target of 6 per cent to 6.5 per cent.
(With inputs from Reuters)