China’s 2019 Growth Outlook

As China’s growth seems to be slowing, some observers see the country amid a “severe downturn.” As they mistake China’s secular deceleration with cyclical fluctuations, they miss the rapid increase in Chinese living standards.

Amid the Christmas meltdown, the Dow Jones plunged to less than 22,000, the lowest since September 2017. Thereafter, it soared over 1,000 points; the biggest single-day point gain ever. Nevertheless, it has declined 4,000 points in two months.

It is this historical market volatility associated with the Trump administration that now overshadows world economy and China. In recent weeks, the U.S. economy has become increasingly exposed to policy mistakes and drastic market fluctuations.

In 2019, Chinese economy will have to cope with great international uncertainty and even more extraordinary market volatility.

Short-term fluctuations versus longer-term trends

Recently, New York Times reported that China was amid “a steep downturn.” Indeed, since the U.S. trade wars last spring, there has been much chatter in the West about the “China’s economic slowdown.”

Once again, the not-so-informed observers have focused on quarterly growth, at the expense of annualized growth. In this regard, 2018 was an exceptional year in China and elsewhere. In the first half, global recovery was still gaining ground. In the second half, Trump’s trade wars caused substantial collateral damage that will be felt even more in 2019, in the absence of a constructive reconciliation.

Yet, China’s growth forecast for 2018 remains 6.5- 6.6%, after a strong first half. Moderation will ensue in the second half and especially in 2019, depending on U.S. tariffs and slower demand worldwide.

For 2019, Chinese GDP growth could eventually achieve around 6.2% in full-year growth, assuming policymakers succeed in the challenging balancing act to sustain higher-quality growth while suppressing faster debt accumulation.

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Disclaimer: Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at the India, China and America Institute ...

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