Slowdown? China’s economy has probably stalled after data released earlier this week showed that auto sales went into reverse for the first time in nearly 20 years.
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The findings came off the back of falling consumer confidence and illustrate the depth and scale of the problems facing President Xi Jinping’s administration.
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In a snapshot of the state of the country’s economy, the China Passenger Car Association reported that car sales fell 5.8% last year to 22.35 million vehicles. This was the first annual decline since 1990.
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Globally, this resembles a motorway pile-up for major international car brands as China is the largest auto market in the world.
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“The situation turned out grimmer than we thought,” Cui Dongshu, the secretary-general of the Association, said. “[But] it will be positive, at least 1% up in 2019. And [the government] has said it is considering offering some stimulus to encourage car purchases, which will be a further boost.”
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Overall, this has been a depressing fourth quarter.
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Manufacturing activity has declined and consumer spending has shrunk, while smartphone shipments have posted all the wrong numbers, plunging 15.5% in 2018.
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Already concerns are growing that China will struggle to meet its official growth target of 6.5%. There have even been suggestions that the figure has been grossly exaggerated.
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“How bad are things? The number that China’s National Bureau of Statistics (NBS) gives is 6.5%, but a research group of an important institution released an internal report. Can you take a guess on the GDP growth rate that they came up with using the NBS data?” Xiang Songzuo, a professor at Renmin University’s School of Finance, told a seminar last month.
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“They used two measurements. Going by the first estimate, China’s GDP growth this year was about 1.67%. And according to the other calculation, the growth rate was negative,” Xiang, the former chief economist of the Agricultural Bank of China, one of the big four state lenders, added in a translated version of his speech on the influential China Change website.
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Indeed, this has become a recurring theme in the past six weeks.
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Alex Capri, a visiting senior fellow at the National University of Singapore’s Business School, highlighted the issue earlier this month.
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‘Strong censorship’
“I do believe the numbers are worse than reported, of course, in that type of political environment where there’s strong censorship, where media is essentially prevented from reporting,” he said.
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While that debate continues to rumble on, Beijing has decided to roll out a raft of measures to shore up the world’s second-largest economy.
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These will include stimulating consumer spending and boosting borrowing for small- and medium-sized companies, as well as another round of tax cuts. Increased infrastructure investment is also planned.
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Still, a key component in turning around sluggish growth will involve resetting China’s strained “relationship” with the United States after a bitter and costly trade war.
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Cr : Gordon Watts
Photo : iStock
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