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China fourth-quarter growth seen dipping to 6.4 percent as domestic, export demand cools - Reuters poll

China fourth-quarter growth seen dipping to 6.4 percent as domestic, export demand cools - Reuters poll
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JASON LEE(Reuters)
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BEIJING (Reuters) - China's fourth-quarter economic growth likely slowed to the weakest pace since the global financial crisis, a Reuters poll showed, as demand faltered at home and abroad amid a bitter trade dispute with the United States.

Analysts polled by Reuters expect the world's second-largest economy to have grown 6.4 percent in the October-December quarter from a year earlier, slowing from the previous quarter's 6.5 percent pace and matching levels last seen in early 2009.

Chinese policymakers have repeatedly pledged more support for the economy while vowing they will not resort to "flood-like" stimulus that Beijing has unleashed in the past, which quickly juiced growth rates but left a mountain of debt.

As the economy loses steam, top leaders are closely watching employment levels as factories could be forced to shed more workers.

On a quarterly basis, growth likely eased to 1.5 percent in Oct-Dec from 1.6 percent in the preceding period, analysts said.

Activity will likely cool further in the current quarter as exports continue to weaken and the government's recent growth boosting measures take time to bear fruit, UBS economist Tao Wang said in a note.

"As the effect of policy easing becomes more apparent and infrastructure investment picks up in the spring construction season, we expect a notable rebound in growth momentum in the second quarter."

China will release its fourth-quarter and 2018 GDP data on Monday (0200 GMT), along with December factory output, retail sales and fixed-asset investment.

Full-year growth is expected to have cooled to 6.6 percent, the weakest pace in 28 years, from 6.9 percent in 2017.

Better-than-expected GDP readings could lift stocks and global commodity prices, and boost the yuan , which has firmed this year following a sharp drop in 2018. Forecasts by 53 analysts polled by Reuters ranged from 6.1 percent to 6.7 percent.

But China's quarterly readings tend to be fairly stable, and investors may put more stock in what the December numbers indicate about the near-term trend.

Shock contractions in trade and factory activity gauges last month have stirred fears the economy slowed more quickly than expected at the close of 2018, leaving it on shakier footing at the start of the new year.

PLENTY OF RISKS

Investors are closely watching whether China and United States can reach a trade deal in current negotiations that would lift some of the global gloom. U.S. tariffs have increasingly weighed on Chinese exports in recent months, dragging down business and consumer confidence.

U.S. Trade Representative Robert Lighthizer did not see any progress made on structural issues during U.S. talks with China last week, Republican U.S. Senator Chuck Grassley said on Tuesday. The two sides have agreed on a negotiating deadline of early March.[nL1N1ZF0XN]

Even if a trade deal were reached, analysts say it would only offer modest relief for China's economy unless Beijing can reenergize weak domestic investment and consumer demand.

To free up more funds for lending, the central bank has already cut reserves that banks need to set aside five times over the past year, with further reductions expected. It has also been guiding market interest rates lower.

However, while there appears to be ample cash in the financial system, bankers complain few companies are willing to borrow give the uncertain business outlook.

A cut in benchmark interest rates is not seen just yet, as policymakers wait to see if earlier measures begin to stabilise conditions. More aggressive easing could also pressure the yuan.

In addition to monetary easing, China is widely expected to loosen the fiscal strings this year, with more construction spending and tax cuts to ease financial burdens on companies.

Some analysts believe China could deliver 2 trillion yuan ($296.2 billion) worth of cuts in taxes and fees this year, and allow local governments to issue another 2 trillion yuan in special bonds largely used to fund key projects.

Still, it will take some time for those measures to be felt.

A Reuters poll forecast China's economic growth would slow further to 6.3 percent in 2019. (For a detailed poll on 2019 GDP and policy forecasts, see [nL3N1ZE27G)

Sources told Reuters last week that Beijing was planning to lower its growth target to 6-6.5 percent this year from around 6.5 percent in 2018. [nL3N1ZA2NV]

Some analysts' in-house models suggest China's growth is already well below what official data suggest.

(Reporting by Kevin Yao; Polling by Khushboo Mittal in Bangalore and Jing Wang in Shanghai; Editing by Kim Coghill)

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