Adrian Watkins

Sliding birthrate, tariffs and weak manufacturing investment remain a drag.

China’s gross domestic product grew at the slowest pace in 29 years in 2019, as weaker exports, investment and consumer spending weighed on the economy.

The 6.1% expansion marked a slowdown from the 6.6% growth seen the previous year, the National Bureau of Statistics said Friday. Growth in the last quarter of 2019 equaled the 6.0% logged in the July-September period.

The bureau said China will remain vigilant of mounting downward pressure from a global economic slowdown and domestic structural issues. The downward trend will not be helped by a sliding birthrate, rising unemployment and problems in the banking sector.

The 0.5 percentage point decline in the growth rate from the previous year is the biggest since a 1.7 point year-on-year slowdown in 2012. The rate of growth in 2019 was lower than the median 6.2% expansion forecast by economists surveyed by Nikkei, but within the 6% to 6.5% range set by the government.

“Economic activity picked up last month, helping to avert a further slowdown last quarter,” Julian Evans-Pritchard and Martin Rasmussen wrote in an emailed note. “External headwinds should ease further in the coming quarters thanks to the ‘Phase One’ trade deal and a recovery in global growth. But we think this will be offset by a renewed slowdown in domestic demand, triggering further monetary easing.”

Total retail sales of consumer goods including e-commerce slowed to 8%, from 9% in 2018, while fixed-asset investment including infrastructure and factory construction decreased to 5.4% from 5.9%.

Final quarter growth holding steady reflects the effect of fiscal stimulus, and respite from the trade war cease fire, said Zhu Chaoping of J.P. Morgan Asset Management.

China also unveiled data on Friday showing the nation’s population growth rate (births minus deaths) falling to 3.34 per thousand in 2019 — the lowest since 1961, and down from 3.81 the previous year. The decline in the fertility rate in an aging society is another headwind for economic growth.

The moderation in full-year growth reflected lower demand for Chinese goods, which has been dampened by the trade war with the U.S., and weaker global electronics orders, according to Rajiv Biswas, Asia chief economist at IHS Markit.

Exports for the year totaled $2.498 trillion, up 0.5% — much slower growth than in 2018, largely due to a drop in shipments to the U.S.

Demand for key Chinese exports such as cellphones and PCs was sluggish. Exports of products subject to higher U.S. tariffs, such as furniture and textiles, also slumped

Despite a “phase-one” deal reached between Beijing and Washington on Wednesday, which will see the U.S. lower tariffs on $120 billion of Chinese goods in return for Beijing buying $40 billion worth of American farm goods, economists remained downbeat on China’s growth outlook this year.

“While businesses and investors can afford to breath a sign of relief, after a difficult 2019, we still see risks to the China outlook as mainly weighted to the downside, given the fragile nature of the trade truce and the risks that still stalk China’s financial markets,” according to Tom Rafferty at the Economist Intelligence Unit.

More than 20 economists surveyed by Nikkei forecast a median 5.9% expansion in 2020, with many expressing concern about local governments’ worsening fiscal positions and lackluster manufacturing investment.

“The pace of growth is expected to edge lower to below 6%, as ongoing structural reforms in the Chinese economy and the continued impact of [the] remaining U.S. tariffs of 25% on $250 billion of Chinese products remain a slight drag on the growth outlook,” said Biswas.

More fiscal stimulus could be on the way, as the government said during a high-level economic work meeting last month that it will prioritize “stability” to mitigate rising domestic risks.

“Consumer spending has yet to pick up the baton from investment as an engine of growth,” said Diana Choyleva, chief economist at Enodo Economics.

But the truce in the trade war with Washington may bring some temporary relief for business confidence, according to Fitch Ratings, which on Friday raised its outlook for GDP growth in 2020 to 5.9%, up 0.2 percentage points.

This article first appeared on Nikkei Asian Review