MNI Analysis:China Growth Hits 28-Yr Low; Govt Vows Investment

     BEIJING (MNI) - China's economy grew 6.6% y/y in 2018, the slowest pace

since 1990, while GDP expanding 6.4% in the fourth quarter, the slowest in a

decade, according to data released on Monday by the National Bureau of

Statistics (NBS).

     One brighter spot is industrial output rose 5.7% y/y in December, bouncing

back from 10-year low of 5.4% in November, and beating the 5.4% forecast by

economists polled by MNI. The gain was still the second-lowest this year. For

the whole year, industrial production grew at 6.2%, down from 6.6% in 2017. 

     Auto production declined 4.1% y/y in December, worse than November's -3.2%.

     Among the biggest risk is the impact of the trade war with the U.S.

Producers of electronic parts and goods may face decreasing orders as more

countries may stop using China-made electronic components if the ongoing trade

talks failed to resolve disputes over intellectual property and the transfer of

technology. The gain of electronic equipment manufacturing output slowed to

10.5% y/y from November's 12.3%.

     Industrial production could be further dampened by sluggish domestic and

foreign demand. December's factory-gate prices recorded the slowest pace in more

than two years at 0.9% y/y.

     --STABILIZING INVESTMENT

     FAI grew 5.9% y/y in 2018, meeting the 5.9% median forecast in an MNI

survey, and maintained the same pace as Jan-Nov. This compared with a 7.2% gain

in 2017.

     Infrastructure investment increased 3.8% y/y, accelerating from 3.7% in

Jan-Nov, indicating that the government has pushed hard to pump up investments

into building projects. Manufacturing investment grew 9.5% y/y in 2018,

unchanged from Jan-Nov.

     Ning Jizhe, the director of the NBS, said the government can be expected to

set out stronger investment targets to help the country bridge gaps in regional

and urban-rural development, as well as catching up with standards in developed

nations. 

     On the contrast, property investment gained 9.5% y/y, decelerating from the

9.7% in Jan-Dec. Developers are more enthusiastic on new housing projects, given

that new construction areas increased by 0.4 percentage point from Jan-Nov.

However, sales areas decreased by 0.1 percentage point from the previous period

suggesting buyers are less bullish.

     Judging from the slowing land transaction in recent months, property

investment could fall further ahead.

     --CAUTIOUS CONSUMERS

     Retail sales improved to 8.2% y/y in December from a historical low 8.1% in

November, beating the median of 8.1% forecast in an MNI survey. In 2018, the

growth stood at 9.0%, compared with 2017's 10.2%.

     Recent data have pointed to a rapid and overall spending slowdown. Concerns

over the country's outlook have led consumers to curtail purchases, which may

reflect the pressure on employment and household income growth, according to a

CICC report.

     Consumers tend to spend less on luxury goods such as cars. Car sales

continued to decline, falling 8.5% y/y in December, compared with -10% in

November.

     In addition, consumers exhibited lower appetite for some of the daily goods

considered "consumption upgrade", such as bottled water, meat products and juice

drinks, CICC said.

     The NBS director Ning said that service consumptions such as tourism,

culture and health care are not included in this indicator. Ning remained

optimistic that Chinese people are spending more on services, as well as

high-quality but expensive products, instead of basic amenities.

     --FIFTEEN MILLION NEWBORN 

     Ning also countered concerns that China's population is plateauing and may

hinder growth, pointing out 15.23 million of new born babies last year and

nearly 900-million-strong labor force. 

     The country still enjoys the "population dividends" expected to drive

consumption and provide sufficient labor for the economy, according to Ning.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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