• China 4Q18 GDP growth slows to 6.4% yoy

• Industrial production recovered in December

• Retail sales growth surprised on the upside in December

• Stabled fixed asset investment growth

• 2019 will be a year of uncertainty

The Chinese economy cooled in the fourth quarter under pressure from faltering domestic demand and bruising US tariffs, dragging 2018 growth to the lowest in 28 years since 1990. GDP growth eased to 6.4% yoy in 4Q18, from 6.5% a quarter ago. Year-over-year growth has been decelerating every consecutive quarter since 1Q18. For 2018 as a whole, economic growth eased to 6.6%, from 6.7% in the prior year.

The secondary industry growth rebounded to 5.8% yoy in 4Q18 after its sharp slowdown to 5.3% in 3Q18. Despite a low base, the recovery in secondary industry growth offset the moderation in tertiary industry growth which eased to 7.4% yoy from 7.9% in 3Q18, and at the slowest pace since 2Q16. Meanwhile, primary industry expanded 3.5% yoy compared to 3.6% in 3Q18. For the full-year 2018, the primary, secondary and tertiary industries expanded by 3.5%, 5.8% and 7.6% compared to 4.0%, 5.9% and 7.9% in 2017 respectively.

Struggling with softening domestic demand and ongoing trade war with the US, growth would continue to slow down this year. The IMF expects growth to weaken further to 6.2%, while the World Bank forecasts it to ease to 6.5%. Meanwhile, the government is expected to turn more cautious when it announces the annual growth target. It likely lowers its growth target to 6.0%-6.5%, from “around 6.5%” in 2018.

Source: BIMB Securities Research - 22 Jan 2019