What’s Going On Here?

New data confirmed that the Chinese economy was fastened in 2019 – but shrewd investors might hope it’ll scurry ahead during the upcoming Year of the Rat.

What Does This Mean?

• China’s economy grew 6.1% in 2019: its weakest year since 1990.
• It blames trade war with the US, and as tensions ebbed, growth did seem to stabilize: China’s economy grew at the same pace last quarter as it did in the previous one.
• December’s performance was particularly positive.
  • Investment shot up, particularly in manufacturing;
  • Industrial output rose 6.9% – significantly more than the 5.9% analysts expected.

That may be partly down to the early Chinese New Year frontloading production to December. Still, the green shoots of winter, which included higher-than-expected retail sales, may leave panda bears bamboozled.

Green shoots is a term used to indicate signs of economic recovery during an economic downturn

Why Should I Care?

For markets: The slowdown should slow down.

• China’s importance to the global economy meant markets worldwide were cheered by its rosy year-end:
  • December’s strong performance,
  • The preliminary trade deal signed with the US

could help things pick up in 2020.

• And while analysts expect the Chinese government’s growth target this year to be lower than 2019’s, the pace of deceleration should slow, partly thanks to significant extra spending on domestic infrastructure projects.

The bigger picture: A looming plague.

• China’s engaged in an effort to shift its economy away from a reliance on investment and towards Western-style consumption.
• However, consumption contributed less to China’s growth last year than it did in 2018.
  • Income growth (a prerequisite for increased consumer spending), disappointed when accounting for inflation: the rise in the prices of goods and services was higher than normal thanks, aptly, to a pork crisis.
  • China’s working-age population actually shrank, signaling an uphill battle ahead.

Content source: Finimize. (2020) Year Of The Rat. Available from: https://www.finimize.com/wp/news/year-of-the-rat/ [Accessed 20 January, 2020]