China's economy, in 4Q19, slowed from the previous quarter to grow 6.0 percent YoY, driven by positive factors from the latest development of the US trade conflict with China. The partial agreement was attributed to the turnaround of China's export and manufacturing sectors in 4Q19 with acceleration of exports after the US had hinted at delaying tariff imposition and resuming talks with China. Nonetheless, overall China's economic indicators in 2019 declined significantly from the figures in 2018. China's economy grew 6.1 percent in 2019, which was a substantial drop from the 6.6 percent growth in 2018. The positive economic figures in 4Q19 were pushed mainly by short-term factors and a low base. The stimulus measures somewhat sustained the growth in 2019 amid a fragile domestic economy.
Despite the positive economic indicators in 4Q19, the momentum of the Chinese economy will continue to slow largely due to lackluster economic performance domestically as the trade war began having wider effects amid the heightened vulnerability of the financial sector. Therefore, the sentiment of the Chinese economy in 2020 remains gloomy, and it may even be further dampened, when compared to that of 2019. KResearch projects the Chinese economy in 2020 to grow by 5.7 percent (the estimated range of our projection is between 5.5 and 5.9 percent). The issues related to the trade war remain contentious for China's economic growth. If the US decides to impose additional tariffs on Chinese goods, the Chinese exports may fall further and drag the Chinese economic growth to the lower end of our projection at 5.5 percent. However, since Beijing still runs a managed economy, the Chinese authorities may combine a variety of monetary and fiscal policies and new forms of policies – not anticipated by the market - to shore up the economy during the slowdown. If this is the case, it may lead to policy risks that affect the economy, and their results are hard to predict.