• Chinese economic growth: The Chinese economy grew at a 6.0 per cent annual rate in the year to December (forecast 6.0 per cent). Over 2019 the Chinese economy grew by 6.1 per cent – the slowest growth in 29 years.
• Chinese data (December): Retail sales rose at an 8.0 per cent annual rate (forecast 7.8 per cent) with production up 6.9 per cent (forecast 5.9 per cent); and fixed asset investment up 5.4 per cent (forecast 5.2 per cent).

The Chinese data is important for exporters, especially rural producers, consumer goods, mining and energy companies.

What does it all mean?

•  The slowdown of the Chinese economy over 2019 reflects two factors. The first is the US-China trade war – an influence that slowed economic growth across the globe, not just China but other advanced economies. The good news is that the Phase 1 trade deal represents a truce in the trade war. The outlook for China and the globe over 2020 is now more positive.
• The second factor at work in slowing the Chinese economy is ongoing maturation of the economy – the path from a less-developed to an advanced economy. Simply, big economies like the US and Australia can’t grow at annual rates like 6 per cent. Chinese growth has slowed over the past decade. The Government had a 6.0-6.5 per cent forecast range for economic growth in 2019. But it is likely that the Chinese economy will record slower annual growth rates in the 5-6 per cent range over coming years. The slowdown in population growth also limits the speed that the economy can grow.

What do the figures show?

• In the December quarter the Chinese economy grew by 1.5 per cent to be up 6.0 per cent on a year ago. Market forecasts had expected a 6.0 per cent annual rate of growth.
• The Chinese economy grew by 6.1 per cent in 2019. Net exports accounted for 11 per cent of growth with consumption accounting for 57.8 per cent and capital formation accounted for 31.2 per cent of growth.
• Retail sales rose at an 8.0 per cent annual rate in the year to December, (consensus: +7.8 per cent), unchanged from the annual growth rate in the year to November. Real (non-inflationary) growth was 6 per cent. Excluding autos, sales rose 9 per cent in the year to December.
• Over 2019, retail sales rose 8 per cent (2018: 9 per cent) with online sales up 16.5 per cent.
• Of the 11 spending categories in December, four recorded stronger annual spending growth than the November result. Notably auto sales improved from a 1.8 per cent decline to a 1.8 per cent increase. Spending on personal care rose at a 13.9 per cent annual rate with cosmetics up 11.9 per cent and telecom up 8.8 per cent. Spending on office supplies fell by 11.5 per cent over the year.
• Industrial production rose at a 6.9 per cent annual rate in December (consensus +5.9 per cent). Production had risen by 6.2 per cent in the year to November. Capacity use rose from 76.4 per cent to 77.5 per cent in the December quarter.
• Over 2019, production rose by 5.7 per cent (2018: 6.2 per cent).
• Of nine industries, only two recorded stronger annual growth in December. Communication was up 11.6 per cent on the year with power equipment up 8 per cent. Also machinery output remained firm, up 12.4 per cent on the year.
• By product, annual crude steel production lifted from 4.0 per cent to 11.6 per cent and output was at record highs over the year. Output of steel products lifted from 10.4 per cent to 11.3 per cent in the year to December. Motor vehicle production rose by 8.1 per cent in the year. Crude oil fell 1.9 per cent on the year and coal production slowed from 4.5 per cent to 2.4 per cent.
• Fixed-asset investment rose by 5.4 per cent in 2019 (consensus +5.2 per cent), up from the 5.2 per cent growth in the 11 months to November.
• Investment by state-owned enterprises rose by 6.8 per cent in 2019 (6.9 per cent in 11 months to November). Real estate investment slowed from 10.2 per cent to 9.9 per cent; foreign investment eased from -0.6 per cent to -0.7 per cent; primary investment improved from -0.1 per cent to +0.6 per cent; tertiary investment slowed from 6.7 per cent to 6.5 per cent; and secondary investment improved from 2.4 per cent to 3.2 per cent.
• Chinese property investment rose by 9.9 per cent in 2019. Construction starts rose by 8.5 per cent. New infrastructure investment grew by 3.8 per cent. Property sales by floor area fell by 0.1 per cent.
• The unemployment rate (nationwide survey-based jobless rate) was 5.2 per cent in December. The jobless rate in the survey of 31 major cities was also 5.2 per cent. China created 13.52 million new jobs in 2019.

What is the importance of the economic data?

• China’s National Bureau of Statistics releases its monthly economic statistics around mid-month. Quarterly GDP data is released around the 19th of January, April, July and October. China’s Customs Office releases trade data, and the People’s Bank of China releases financial statistics, around the 10th of each month. China is Australia’s largest trading partner and changes in the Chinese economy have major implications for the Aussie economy.

What are the implications for interest rates and investors?

• China is our major trading partner. And our reliance on China is far higher than other developed economies. So today’s data readings from China are encouraging. Despite a trade war with the US, the Chinese economy still managed 6.1 per cent growth in 2019.
• The Reserve Bank Board will take today’s data into account when deciding rate settings at the February 4 meeting.

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