China Slowdown for Switch to Better Innovation- and Creation-led growth

Reuters says in its report “’Very difficult’ for China’s economy to grow 6% or faster: Premier Li” that though 6.3% annual GDP growth rate was achieved in the first six months of 2019, Chinese premier Li Keqiang told Reuters in a recent interview that it is very difficult for China’s economy to grow 6% or faster.

However, in order to attain the goal of building China into a modernized country by 2050, China must be able to maintain an average growth rate of at least 6% in the period from now to 2050.

China is now making the very difficult switch from export- and investment-geared to innovation-, creation- and consumption-led economic growth that involves the transformation of lots of enterprises that mainly produce goods for exports. Lots of them have to move to areas with cheaper labor. They have to lay off most of their employees as they will lose their competitive edge if they incur the heavy costs of moving the employees along with them.

China has to complete that difficult transformation if it wants further economic growth though it may encounter lots of difficulties now, including economic slowdown and quite serious unemployment, but that will be the heavy costs of the transformation. The difficulties may give rise to complaints among quite a few people, but the US is helping China to shift the blame to the tariff hikes imposed by the US in its trade war against China.

However, as the trade war has quickened China’s economic transformation, innovation, creation and consumption will soon make it easy for China to achieve a growth rate higher than 6%.

Comment by Chan Kai Yee on Reuters’ report, full text of which can be viewed at


Chinese Economy Suffers Little by US Trade War Attacks

SCMP says in its article “Not every economist thinks the trade war is a huge deal; ‘look at the numbers’, says CME executive director” that US tariff hikes has only reduced China’s growth rate by 0.01 percent and its further tariff hikes to 25% on $200 billion of Chinese exports will only reduce China’s growth rate by 0.033% so that IMF predicts only 0.1% drop to 6.2% in China’s growth rate well within China’s planned range between 6 and 6.5 percent.

That being the case, It will be Trump instead of Xi Jinping to make substantial concessions in their talks on the sideline of G20 summit. Will Trump do so? I doubt that; therefore, I am not optimistic about the outcome of their meeting.

Comment by Chan Kai Yee on SCMP’s article, full text of which can be viewed at

China’s Xi Fully Confident in China’s Ability in Sustaining Trade War

On the eve of Chinese President Xi Jinping’s official visit to Russia, China’s president speaks to TASS and Rossiyskaya Gazeta on quite China’s economic outlook on June 4.

When he was asked the question: Could you share some insights on China’s economic outlook?

Xi gave the following reply to show his confidence in China’s ability to resist US trade war attacks:

The Chinese economy has achieved tremendous growth since the founding of New China 70 years ago, and especially since the start of reform and opening-up 40 years ago. China is now the world’s second largest economy, the largest manufacturer, the largest trader in goods, and holder of the largest foreign exchange reserves. In 2018, the Chinese economy passed the RMB90 trillion yuan mark and per capita GDP was close to US$10,000. Our 6.6 percent economic growth rate, one of the highest in the world, meant that China accounted for around 30 percent of global growth last year.

In spite of a slowdown in global growth and trade, the Chinese economy has had a strong start this year with key economic indicators kept in a proper range. In the first quarter, our GDP grew by 6.4 percent, sustaining its momentum of steady growth in recent years and representing the 14th consecutive quarter of staying in the 6.4 percent to 6.8 percent range. Domestic consumption remained the main driver of growth. Employment continued to expand, with 4.59 million urban jobs added in the first four months of 2019. Personal income grew faster than the economy. Prices were generally stable, with consumer prices posting a modest growth of 2 percent. Total imports and exports were up by 4.3 percent year-on-year, and China’s foreign exchange reserves stayed above US$3 trillion. Apart from all this, we were able to improve the economic structure, transform the model of development and enhance the quality and efficiency of economic performance, thus strengthening the momentum of steady and robust growth.

The trajectory of our economy toward more steady growth has not changed and will remain so in the long run. Looking ahead, a number of factors will support the steady, healthy and sustainable growth of the economy. These include:

First, China’s large pool of human resources. China has a population of nearly 1.4 billion, a 900-million-strong workforce, a talent pool of 170 million college graduates and people with professional skills, the world’s largest middle-income population, and more than 100 million market entities.

Second, China’s strong internal driving forces. The Chinese economy is mainly driven by domestic consumption. In 2018, domestic consumption contributed 108.6 percent of economic growth; in particular, the contribution of final consumption was as high as 76.2 percent.

Third, China’s growing economic dynamism. China’s R&D spending ranks second in the world, accounting for around 2.18 percent of its GDP. Emerging strategic industries, the sharing economy and other new economic forces are seeing continuous expansion.

Fourth, China’s mobilization capability. We have in China the strong leadership of the Communist Party of China, the political advantage that comes from being able to mobilize resources for major undertakings, the spirit of a nation united as one, the solid material and technological foundation built through decades of rapid development in the era of reform and opening-up, the enormous resilience, potential and flexibility in development, and the rich experience in macro-regulation as well as ample policy space. We therefore have all the necessary conditions as well as the capability and confidence to deal with any risks and challenges.

Comment by Chan Kai Yee on’s report “Xi Jinping: Russia and China staying in tune with the times”, full text of which can be viewed at

A private survey shows China’s manufacturing activity for May was slightly higher than expected

June 3, 2019

Yen Nee Lee@YenNee_Lee

Key Points

  • The Caixin/Markit factory Purchasing Managers’ Index for May was 50.2, slightly above the 50 level which analysts polled by Reuters had expected. The PMI reading for April was 50.2.
  • PMI readings above 50 indicate expansion, while those below that signal contraction.
  • Growth of new orders grew in May, and the rate of new business growth quickened slightly in the last month, Caixin said in a statement on Monday.

A private survey of China’s factory sector showed on Monday that manufacturing activity was slightly better than expected in May.

The Caixin/Markit factory Purchasing Managers’ Index for May was 50.2. Analysts polled by Reuters had expected the indicator to come in at 50. The PMI reading for April was 50.2.

PMI readings above 50 indicate expansion, while those below that signal contraction.

Last week, China’s official manufacturing PMI for May came in at 49.4, lower than the 49.9 economists polled by Reuters had forecast. It was lower than April’s reading of 50.1. The official non-manufacturing PMI for May was 54.3 — unchanged from April.

Growth of new orders grew in May, and the rate of new business growth quickened slightly in the last month, Caixin said in a statement on Monday.

“The stronger rise in overall new business supported a renewed expansion in buying activity among Chinese manufacturing firms. Though only slight, it was the first time that purchasing activity had increased for five months,” the statement added.

Despite the steady reading that was still in expansionary territory, business confidence slipped to the lowest level since the survey series began in April 2012.

That was “amid concerns of an escalating China-US trade war and forecasts of relatively subdued global demand,” the statement added.

Analysts had warned that the official PMI data show that growth in China remains under pressure, despite earlier optimism that Chinese officials managed to stabilize the world’s second-largest economy.

Before the release of the Caixin indicator, an economist from Mizuho Bank said the data “will not supplant the overall sense of economic pessimism” even if it turns out “unexpectedly resilient.”

“Our best guess is that despondency will build up around China’s growth/exports expectations, spilling over more widely to the rest of Asia/Australia, in the near-term,” Vishnu Varathan, Mizuho’s head of economics and strategy, wrote in a Monday morning note.

“What’s more, the wider strategic tech war playing out with Huawei (and related suppliers and advanced Chinese tech companies) also creates a chill around the outlook for not only for exports, but for wider commercial activity as well,” he added.

The PMI is a survey of businesses about the operating environment. Such data offer a first glimpse into what’s happening in an economy, as they are usually among the first major economic indicators released each month.

For China, the PMI is among economic indicators that investors globally watch closely for signs of trouble amid domestic headwinds and the ongoing U.S.-China trade dispute.

The official PMI survey typically polls a large proportion of big businesses and state-owned enterprises. A separate survey, the Caixin indicator, features a bigger mix of small- and medium-sized firms.

Source: CNBC “A private survey shows China’s manufacturing activity for May was slightly higher than expected”

Note: This is CNBC’s report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.

China February factory activity shrinks to three-year low, export orders worst in a decade

Yawen Chen, Ryan Woo February 28, 2019

BEIJING (Reuters) – Factory activity in China contracted to a three-year low in February as export orders fell at the fastest pace since the global financial crisis, highlighting deepening cracks in an economy facing weak demand at home and abroad.

The gloomy findings are likely to reinforce views that the world’s second-largest economy is still losing steam, after growth last year cooled to a near 30-year low.

Even with increasing government stimulus to spur activity, concerns are growing that China may be at risk of a sharper slowdown if current Sino-U.S. trade talks fail to relieve some of the pressure.

The official Purchasing Managers’ Index (PMI) fell to 49.2 in February from 49.5 in January, pointing to a contraction in activity for the third straight month, according to data released by the National Bureau of Statistics (NBS) on Thursday. The 50-mark separates growth from contraction on a monthly basis.

Analysts surveyed by Reuters had forecast the manufacturing gauge would stay unchanged from January’s 49.5. China’s factory activity has been generally softening since last May.

“Unless the trade war truly turns into an extended truce, the weakening trend may not end quickly,” Iris Pang, Greater China economist at ING, said in a note. “As such we expect March’s PMI to fall, too.”

Manufacturing output contracted in February for the first time since January 2009, during the depths of the global crisis. A breakdown of the survey’s findings showed the output sub-index fell to 49.5 from 50.9 the previous month.

Manufacturers continued to cut jobs more aggressively, a trend Beijing is closely watching as its weighs more support measures. The pace of job-shedding was the fastest since December 2015.

New export orders shrank for a ninth straight month, and at a sharper rate, in the latest sign of deteriorating global demand. The sub-index fell to 45.2, the lowest since February 2009, from 46.9 in January.

But total new orders — an indicator of future activity — edged back into expansionary territory, suggesting some improvement in domestic demand. The sub-index rose to 50.6 from 49.6 in January, after falling for two consecutive months.

China watchers typically advise caution over interpreting the country’s economic data early in the year because of the timing of the week-long Lunar New Year holidays.

Many firms scale back operations or close for long periods around the holidays, which began on Feb. 4 this year. But workers, business owners and labor activists have told Reuters that companies have shut earlier than usual as the trade war bites, with some likely to close for good.

Ford Motor Co’s joint venture in China has quietly begun dismissing thousands of its workers due to weak auto sales in the world’s second-largest economy, the New York Times reported on Wednesday.

Record lending by Chinese banks in January and a sharp rebound in its stock markets have lifted some of the gloom hanging over the economy.

But analysts say it will take months to see if the strong credit impulse translates into improved business activity, assuming companies are borrowing for fresh expansion or investment, not merely refinancing existing debt.

In a sign of the wider impact China’s shrinking demand is having globally, factory output in Japan, the world’s third- largest economy, posted its biggest decline in a year in January, data showed on Thursday. That followed data out last week that showed Japan’s exports logged their worst drop in more than two years as China-bound shipments tumbled.


The PMI survey also showed smaller firms were still bearing the brunt of the pressure in February while large firms – many of them state-owned enterprises – stayed afloat, despite targeted policy measures to help struggling private firms refinance and increase capacity.

Some economists believe China’s economic growth could even dip below 6 percent in the first half — from 6.4 percent in the fourth quarter — before stabilizing later in the year as a series of support measures in 2018 and 2019 begin to take effect.

“The cooling property sector, the end of the durable goods replacement cycle and the payback effect from the previous front-loading of exports have been and will remain headwinds,” Ting Lu, chief China economist at Nomura, wrote in a note.

Exports are likely to remain under pressure even if current China-U.S. trade talks result in a deal, as demand is weakening globally, analysts say.

President Donald Trump said on Monday that he may soon sign a deal with Chinese President Xi Jinping to end the countries’ trade war, if the two sides can bridge remaining differences

But the lead U.S. negotiator said on Wednesday it was too early to predict the outcome.

U.S. issues with China are “too serious” to be resolved with promises from Beijing to purchase more U.S. goods and any agreement must include a way to ensure commitments are met, U.S. Trade Representative Robert Lighthizer said.

Growth in China’s services industry also cooled in February after rebounding for two straight months as new orders rose at a slower pace, another sign of strain as consumers turn more cautious about spending.

Services growth was mainly dragged by a notable slowdown in construction activity, suggesting recent fiscal stimulus through more bond issuance is not fully flowing through yet to infrastructure investment. The sub-index fell near 2 percentage points to 59.2 in February.

GRAPHIC – China’s economic trends:
Graphics to be viewed at

GRAPHIC – Major items among $200 bln of Chinese goods hit by U.S. tariffs (announced Sept):

GRAPHIC – Major items among $16 bln of Chinese goods hit by U.S. tariffs (Aug):

GRAPHIC – Major items among $34 bln of Chinese goods hit by U.S. tariffs (July):

Reporting by Yawen Chen and Ryan Woo; Editing by Kim Coghill

Source: Reuters “China February factory activity shrinks to three-year low, export orders worst in a decade”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.

BOJ Kuroda: China economy to pick up in latter half of this year

February 26, 2019

TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda said on Tuesday he expected China’s economic growth to pick up in the latter half of this year thanks to stimulus measures taken by the government.

“China’s economy slowed quite significantly in the latter half of last year” as companies felt the pinch from Sino-U.S. trade tensions, Kuroda told parliament.

“The economy may remain in the doldrums in the first half of this year but will likely pick up thereafter, as authorities have taken fiscal and monetary stimulative action,” he said.

Reporting by Leika Kihara; Editing by Chang-Ran Kim

Source: Reuters “BOJ Kuroda: China economy to pick up in latter half of this year”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.

Against consensus: China’s economy in 2019 might be okay

Chinese Vice President Wang Qishan speaks at World Economic Forum. SubChina’s photo

Jeremy Goldkorn January 23, 2019

Speaking to the gathered worthies of Davos, China’s Vice President Wáng Qíshān 王岐山 today expressed confidence in China’s economy. Reuters reports:

“There will be a lot of uncertainties in 2019, but China’s economy will continue to achieve sustainable growth,” Wang told delegates at the World Economic Forum in Davos.

“Speed does matter. But what really matters is the quality and efficiency of our economic development,” he said.

China does not see its economic expansionary cycle coming to an end, Wang added, seeking to dispel market concerns that faltering domestic demand and bruising U.S. tariffs could spark a major slowdown ahead.

Well, Wang would say that, wouldn’t he? But I’ve recently heard similar views from a number of people who tend not to be wrong. Today’s news brought some other reasons you may want to reconsider joining the growing consensus that China’s economy is headed for gloom and doom:

•Consumer goods giant Procter & Gamble posted quarterly results: There was no slowdown in China. CFO Jon Moeller said that “the company is ‘fairly confident’ about growth in China in the following quarter,” according to CNBC.

•“Yes, China’s 6.6 percent growth in 2018 is its slowest in nearly 3 decades,” tweeted Economist correspondent Simon Rabinovitch. “But given the size of its economy, that represents about $1.2 trillion of additional demand, nearly twice as much as it generated with 14 percent growth in 2007.”

•The government is taking action — from stimulus spending to monetary policies and tax cuts. (Caixin has a roundup of problems with the economy and government measures to tackle them.)

•“Still the world’s best consumer story.” This is what Investment Strategist for Matthews Asia Andy Rothman is still calling China.

Source: SubChina “Against consensus: China’s economy in 2019 might be okay”

Note: This is SubChina’s report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.