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China Econometer – November 2018
Wednesday, 19 December 2018 10:41

Growth targets still in range
In Q3 of 2018 China’s economic growth slowed to its weakest pace since Q1 of 2009, at only 6.5 percent. This narrowly fell short of the expected 6.6 percent, and is below the year-on-year figure of 6.7 percent in the previous quarter. On a quarter-on-quarter basis, GDP growth in Q3 met expectations at 1.6 percent, which was below the Q2 growth of 1.8 percent. The slowdown in economic growth is believed to have been exacerbated by the continued trade tensions between China and the US, with further tariffs being placed on selected exports in September, affecting October’s growth. China remains on track, however, to meet its annual growth target of 6.5 percent, as the first 3 quarters has seen an overall 6.7 percent year-on-year growth.

Key Economic Indicators
The producer price index (PPI) rose to 3.3 percent in October, a decrease from September’s 3.6 percent. The consumer price index (CPI), remained steady, however, at 2.5 percent, which has been attributed to stable food prices in October. On a month-to-month basis, PPI increased 0.4 percent. Exports increased in October, as exporters rush to ship inventories before the US tariffs of 10 percent as of September 2018, increase to 25 percent in January 2019. Foreign exchange reserves fell by USD 33.93 billion in October and currently sit at USD 3.053 trillion. This is below the market expectations of USD 3.06 trillion, and the largest monthly decline since December 2016. An increase of the gold reserves was seen, rising from USD 70.327 billion in September, to USD 71.968 billion in October.

Manufacturing activity decreases as further US tariffs take effect
China’s official manufacturing purchasing manager’s index (PMI) declined from 50.8 in September to 50.2 in October. This fell short of analysts’ expectations of 50.6. The index is the lowest since July 2016, with sub-indices such as production and new orders falling from a month prior. New export orders have also contracted for the fifth consecutive month. The decline in the index is attributed to the ongoing trade disputes with the US, as October was the first month in which the additional September 24 US tariffs on Chinese products took effect. The official services PMI also fell from 54.9 in September to 53.9 in October which, together with the manufacturing PMI, is expected to see further decline during the rest of Q4.

Renewed Commitment to Openness at Shanghai Expo
President Xi Jinping in a speech during the first day of the China International Import Expo, promised that further cuts in import tariffs will be implemented and that improved efforts to open China’s economy was the aim of the Expo. Official figures had over 3,600 exhibitors attend the expo from 172 countries. The ongoing trade tensions with US and issues around intellectual property were not mentioned in his speech, but rather China being a major export destination for the attending companies was emphasised. The promise of reduced import tariffs would play a significant role in the shift from China being a major exporter of goods, to aligning with their aim of stimulating domestic consumption. President Xi Jinping stated that China would, over the next 15 years, spend USD 30 trillion on imported goods and USD 10 trillion on services.

This article is produced by The Beijing Axis and is published in The Econometer section of ChinAfrica magazine (December 2018), an English and French language monthly publication that provides news, views and analysis on all things China, Africa and China-Africa relations.