BOFIT Viikkokatsaus / BOFIT Weekly 2019/04

Official figures show Chinese GDP growth slowed further last year to 6.6 % p.a. from the revised 2017 growth of 6.8 %. In the fourth quarter of 2018, the pace of on-year growth officially slowed to 6.4 %. China last experienced such weak growth figures in the first quarter of 2009, when the impacts from the global financial crisis hit the Chinese economy hardest. In nominal terms, GDP grew last year by 9.7 % to around 90 trillion yuan (13.6 trillion dollars, 11.5 trillion euros).

Several indicators suggest a sharper slowing in growth than the official figures imply. The weakness in fixed investment is particularly difficult to square with official GDP figures, even with the obvious litany of problems with investment figures themselves. Fixed investment officially correspond to about 40 % of Chinese GDP, while real growth in urban-area fixed asset investment (FAI, which does not correspond to fixed investment in the national accounts) last year was only about 1 %. Because the net impact of foreign trade on economic growth was even negative, it is hard to see domestic consumption alone propping up the official GDP growth figures. Retail sales, a key measure of consumer demand, increased by about 7 % last year in real terms, down from 9 % in 2017. Thus, the reported mere 0.2 percentage point slowdown in GDP growth from 2017 seems suspect.

While GDP demand figures have yet to be released, the NBS reports three-quarters of 2018 growth came from domestic consumption. Output-side figures show services slightly increased their relative share of GDP to just over 52 %, while the combined share of manufacturing and construction was 41 % and primary production 7 %.