A deeper reading of China's 2018 GDP figure, the lowest in 28 years, has revealed weak links that demand more government efforts as the Chinese economy transforms from quantity-led to quality-driven growth, analysts said on Monday.
China's GDP averaged 6.6 percent growth in 2018. The figure was 6.7 percent in 2016 and 6.9 percent in 2017, according to the National Bureau of Statistics (NBS).
Although consumption accounts for an increasing share in aggregate demand, its driving effect on GDP growth is not strong. Instead, it provides more of a stabilizing effect, Cong Yi, a professor at the Tianjin University of Finance and Economics, told the Global Times on Monday.
"Investment and exports remain the most relevant subcategories that propel GDP growth," Cong said.
Chinese exports grew 7.1 percent year-on-year in 2018.
Liao Qun, chief economist at China CITIC Bank in Hong Kong, said a surprise in 2018 was that exports were actually not affected by the China-US trade war. The impact was only felt as late as December, when exports grew a mere 0.2 percent year-on-year.
"As merchants of two countries frontloaded their orders, exports actually rose. Thus, exports are a potential sector that would weigh on GDP growth in 2019, when the trade war takes its toll and the repercussions of frontloading emerge," Liao told the Global Times on Monday.
"The way to work on exports in 2019 is to see whether the country can significantly boost non-US market exports," Liao said. The US accounts for about 19 percent of China's export market.
Cong said the weak link that deserves the most government effort in 2019 is slowing private-sector investment. "Boosting growth in this sector involves boosting confidence among private entrepreneurs."
China's private-sector investment picked up speed to expand 8.7 percent in 2018, up 2.7 percentage points. But the sector last year experienced dented confidence amid China's economic transformation and financing woes.
"What the trade war actually hit was domestic demand, as it affected both the stock market's performance and consumer confidence. Private companies are less willing to invest and consumption slowed as individuals grew wary. In 2019, consumption is likely to remain flat," Liao said.
Liao pointed out that government-led infrastructure investment sector could be a strong driver. Such investment is expected to rise from less than 4 percent in 2018 to about 10 percent in 2019. Infrastructure investment accounts for about 20 percent of total investment, according to Liao.
Infrastructure demand was held back in 2018 amid government deleveraging efforts.
Such spending grew 19 percent in 2017 and 17.4 percent in 2016.
The industrial output grew 6.2 percent in 2018, lower than the 6.6 GDP growth rate. The figure was also 0.3 percentage points lower than in 2017 as well as 0.7 percentage points lower than in 2016.
"China's industrial sector has undergone deep changes in the past three years," Cong said. "Some companies survive, and others just die. It's never easy. It is against this backdrop that industrial output lagged behind overall GDP growth."
However, Cong said the NBS figures have limitations.
"Incomes are growing for the rural population, for example. But the NBS figures can't project a structural change driven by government efforts to improve living standards and targeted poverty alleviation campaigns. These changes will become pillars for growth in the future," Cong said.