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The Implications of China’s Economic Slowdown

27 Sep The Implications of China’s Economic Slowdown

China’s economy is continuing to slow, with growth dropping to 6.2 per cent in the second quarter of 2019, the lowest in 27 years. We held a talk on 24 September 2019 with Dr Chen Gang, Assistant Director and Senior Research Fellow of the East Asian Institute (EAI) and Mr Jimmy Koh, Managing Director, Sector Solutions Group, Business Insights and Analytics, Group Wholesale Banking at United Overseas Bank (UOB) to discuss the implications for the region.

The session was moderated by SIIA’s Director of Operations Ms Seraphim Cheong. Here’s some highlights from the discussion.


The US-China trade war may have exacerbated China’s slowdown, but the economy was already beginning to slow even before President Xi Jinping took power. That said, it is notable that China’s GDP growth target for 2019 is 6 to 6.5 per cent. Chinese growth targets are usually a specific figure, not a range. The fact that the target is a range this year indicates that Chinese policymakers are not sure they can hit a 6.5 per cent target.

The People’s Bank of China has indicated that it is reluctant to implement further stimulus measures, such as major interest rate cuts. It may be that Beijing does not have much room to move. To some extent the Chinese slowdown has become a self-fulfilling prophesy, as consumer sentiment is now down and businesses are also withholding capacity.


In this context, China is indeed seeking an end to the US-China trade war, even if this means offering some concessions to the Trump administration. Although Chinese politicians have signalled to their domestic audience that China is able to rely on its own consumption and find other non-US markets, in reality it is not feasible to decouple the US and Chinese economies.


However, even amidst the overall slowdown in China, there are still regions of China and particular economic sectors that are doing well, providing good opportunities for investors – such as China’s booming technology space.

Additionally, while the economic slowdown may impact China’s Belt and Road Initiative (BRI) to some extent, the slowdown will not derail the BRI entirely. China still has industrial overcapacity and state-owned enterprises may still be receiving incentives to participate in the BRI, meaning that China’s infrastructure investment and involvement in regional projects will continue for the foreseeable future.