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Date published

MERICS Economic Indicators Q4/2018

Losing steam: China’s economy shows signs of weakness

China‘s growth has dropped to 6.6 percent in 2018 – the slowest pace since 1990. The continuing trade conflict with the United States, the Chinese government’s struggle against high debt levels and excessive credit have contributed to the slowdown. Party and state leader Xi Jinping himself has voiced concern: China’s economy is facing profound and complicated changes, he said at a meeting of provincial and ministry officials, according to the Xinhua news agency.

In the latest issue of the „MERICS Economic Indicators,“ researchers Max J. Zenglein and Maximilian Kärnfelt argue that the unusually stable period of economic growth under Xi Jinping is coming to an end. They analyze how Beijing tries to support growth by introducing tax incentives, local stimulus programs and investments into infrastructure. However, the increasingly challenging international environment – including  the continuing trade spat with the US and increasing international skepticism about China’s assertive innovation and technology policy – makes a rapid recovery unlikely.

China’s labor market will be a key area to watch in 2019. As the economy has slowed in the past years, so has wage growth. Employment, however, has remained resilient with demand for labor higher than supply. But as concerns about the state of the economy spread, hiring might slow and there could be layoffs – a worrying trend for Beijing ahead of the 100th anniversary of the Communist Party in 2021. To avoid a crisis on the job market, a number of provincial governments have already announced new support measures. The MERICS analysis shows: 2019 will be an extremely  challenging year for China’s economy. 

The MERICS Economic Indicators are published on a quarterly basis and trace the multiple data sets that shape China’s development in key areas, among them growth figures, investment flows, industrial output, financial markets and consumer sentiment.