China's economy is slowing.
On Monday, official numbers showed
annual GDP growth in China last year fell to its lowest level
since 1990.
Growth in the fourth quarter of 2018
was the slowest quarterly growth since the financial crisis
a decade ago.
And the economy has now slowed for three consecutive quarters.
For investors, the big questions are
whether this is the start of a long awaited hard landing
for the Chinese economy, and how much
that can be blamed on the trade war with the US.
Official numbers indicate that the direct hit from US trade
tariffs is not as bad as it could have been,
but economists and company executives
say the impact on sentiment goes much deeper,
hitting high street spending and new investment
by Chinese and foreign companies in the country.
Many companies are reluctant to build new factories
because of fears their exports will be hit by US tariffs,
and that has contributed to the slowdown
in an economy that remains extraordinarily
reliant on investment.
Beijing has been trying to wean the economy off its addiction
to debt fueled stimulus, but the current slowdown
has prompted the government to open the spigots once again.
The question is whether the same old formula
will work to revive the world's second biggest
economy once again.
Overall debt in China has now reached around 300% of GDP,
and more than a decade of frantic infrastructure
construction means there is much less need for those roads,
bridges, and railway lines.
The government is trying to convince state-owned banks
to lend more to private companies, which
already provide most of the growth and employment in China.
But with the economy slowing and defaults rising,
the banks prefer to lend to state companies.
It is still too early to say whether China
is headed for a full fledged hard landing,
but it is clear that US President Donald Trump's trade
war is making that possibility more likely.