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China's Q4 GDP growth dented by services, agriculture

Slowdown is despite a strong pick-up in construction activity

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Auto sales in the world's biggest car market shrank for the first time since the 1990s.

Beijing

WEAKNESS in the service and farm sectors slowed China's economic growth in the fourth quarter, despite a strong pick-up in construction activity, official data showed on Tuesday.

Services grew 7.4 per cent from a year earlier, slowing from 7.9 per cent in the third quarter, while growth in agriculture slowed to 3.5 per cent from 3.6 per cent, the National Bureau of Statistics (NBS) said.

The sector-by-sector breakdown follows release of headline gross domestic product (GDP) figures on Monday that showed China's economy in the last quarter expanded at its slowest rate since the global financial crisis due to faltering domestic demand and an ongoing trade war with the United States.

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The services sector accounted for almost half of GDP in the quarter by value as China continued to transition towards a service-oriented economy, while agriculture contributed about 10 per cent, according to Reuters' calculations based on the latest data.

Services suffered a broad-based slackening from real estate to tech, as these industries braced for more cautious investor lending and softer consumer demand.

Real estate growth slowed to 2 per cent year-on-year in Q4 from 4.1 per cent a quarter earlier, as government tightening measures to curb speculation and skyrocketing prices subdued overall demand.

The sector contributed 6.4 per cent to GDP in the quarter.

The retail and wholesale sector slowed to 5.5 per cent from 6.2 per cent as consumption of physical goods lost momentum. Auto sales in the world's biggest car market shrank for the first time since the 1990s.

Though retail sales growth picked up marginally in December to 8.2 per cent, the consumer strength gauge is around the weakest in 15 years.

Having been a stellar performer benefiting from supportive policies, the tech sector still grew at double-digit rate but growth slowed to 29.1 per cent in Q4 compared with 32.8 per cent in Q3. It accounted for about 3 per cent of GDP in Q4.

Finance was one of the few bright spots in the service sector thanks to recent government stimulus measures to keep liquidity ample.

Construction enjoyed a strong recovery thanks to support for infrastructure projects, as the government front-loaded local government bond issuance to support their financing.

The sector - accounting for 8 per cent of the economy - grew 6.1 per cent in Q4, accelerating from the previous quarter's 2.5 per cent growth.

China's more than US$13 trillion economy will likely stabilise in the second half of 2019 without the need for aggressive stimulus, according to Goldman Sachs Group Inc chief economist Jan Hatzius.

"We don't think it's going to be an aggressive amount of stimulus," Mr Hatzius told Bloomberg Television's Rishaad Salamat in an interview in Hong Kong. "But we would expect some stabilisation as we move through 2019 in the Chinese economy."

The pace of expansion in the world's second-largest economy slowed to 6.4 per cent during Q4, the softest since 2009.

For the full year, the economy expanded 6.6 per cent, the slowest pace since 1990, stoking expectations for additional stimulus from the government after a series of piecemeal measures ranging from tax cuts to steps to boost lending.

While China is locked in a bruising trade war with the US, Mr Hatzius pinned much of the slowdown on the government's policy push to curb the overall level of debt in the economy.

"The most important driver really has been the credit deceleration and the concerns about financial imbalances on the part of the policy makers that has led them to pursue stricter policies," he explained. "To us, that is the main swing factor in a negative direction in 2018, maybe in a slightly more positive direction in 2019."

But he also flagged the risk to sentiment and investment from the trade war and cautioned that negotiations between the US and China could yet fail to resolve their differences. REUTERS, BLOOMBERG