According to Elliot Clarke, analyst at Westpac, China’s Q4 GDP marked the update as unquestionably weak and cause for concern and given that annual growth came in at its weakest pace since the GFC (6.4%yr), pessimism is understandable, but not well founded.
Key Quotes
“First and foremost, this outcome comes after a very deliberate and purposeful policy shift by the central government to improve the quality of growth and guarantee long-term financial stability. This is the primary factor behind the softer growth of 2018, not trade tensions. More sustainable, higher productivity growth is most certainly in China’s long-term interest.”
“Second, with the economy now more focused on quality, Chinese authorities are beginning to become more pro-active on growth, particularly investment in infrastructure. There is therefore a strong likelihood of the 6.0% annualised growth of Q4 being a near-term floor for GDP.”
“This does not mean that growth in China will take off however. The focus on quality will remain in place and, as per the most recent credit data and policy actions, support for growth from credit provision will only build slowly. Essential to China’s long-term prosperity is that new loans made to firms and households are based on strong standards, and further that markets and household wealth are stewarded well.”
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