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China revises 2019 GDP lower with a $77 billion cut to manufacturing

Workers are seen at the production line of lithium-ion batteries for electric vehicles (EV) at a factory in Huzhou, Zhejiang province, China.  

Reuters

BEIJING — China’s National Bureau of Statistics revised the national growth rate for 2019 lower on Wednesday with major cuts in the manufacturing sector.

The downward adjustment gives the country a lower base from which to report growth for 2020.

GDP last year now rose only 6.0% to 98.65 trillion yuan ($15.1 trillion), versus 6.1% as previously reported, the bureau said.

The primary reason by far was a 503.8 billion yuan ($77.15 billion) reduction in manufacturing, or about 2% of the sector’s original contribution to growth in 2019.

“This suggests the impact of the US-China trade war on China’s manufacturing activity has been underestimated,” Yue Su, principal economist at The Economist Intelligence Unit, said in a statement.

Trade tensions between the world’s two largest economies began to escalate in 2018, with friction rising the following year as both countries applied tariffs on goods from the other and the U.S. putting major Chinese technology companies on blacklists. Both countries reached a temporary truce with the signing of the phase one trade agreement in January 2020.

The Statistics Bureau made the greatest upward changes to the tertiary, or services, industry, with information transmission, software and IT services rising 70.2 billion yuan.

China regularly revises its GDP figures, often toward the end of the year. Many doubt the accuracy of the statistics as local governments typically face political pressure to meet pre-set growth targets.

This year, in the wake of the coronavirus pandemic, the central Chinese government made a rare decision not to announce a GDP growth target. Analysts generally anticipate growth of around 2% in 2020.

To Bruce Pang, head of macro and strategy research at China Renaissance, the large downward adjustment to the secondary, or manufacturing, industry is in line with efforts to reduce the proportion of that industry in overall GDP.

Such lowering of last year’s figure also helps the “brightness and quality” of economic growth figures for the next few years, Pang said, according to a CNBC translation of his Chinese comments.


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