China Economic Quarterly Q4 2018

The 6.4% growth rate of GDP in Q4 is slightly lower than expected, but for the whole year, 6.6% is a reasonable performance.

The China Economic Quarterly is a market outlook prepared by PwC China and Hong Kong on a quarterly basis to share the latest economic and policy updates. This issue provides an overview of the macroeconomic trends in Q4 2018, some policy updates and hot topic analysis.


Here are some highlights of the Q4 updates:

  • Total GDP increased by US$1.4 trillion during the year, which is almost equivalent to economic size of Australia, the world’s 14th largest economy.
  • Total fixed asset investment reached 63.56 trillion yuan, expanding by 5.9% year-on-year in 2018. The growth rate of fixed asset investment in Q4 is slightly better than Q3, but still lower than overall GDP growth. 
  • Total real estate investment increased by 9.5% and reached 12.0 trillion yuan which account for nearly 19% of total fixed asset investment. Sources of funds were still tight for property developers
  • PMI has gradually fallen to a lower level in Q4. The PMI in December dropped below the threshold of 50% and is a reflection of economic slowdown in the manufacturing sector.
  • Profits of foreign owned industrial enterprises (for companies over certain scales) only increased by 1.9% in 2018, but profits of SOEs and private companies went up 12.6% and 11.9%.
  • Total retail sales of consumer goods went up by 9.0% year-on-year to 38.10 trillion yuan in 2018. Growth of retail sales has increased in the last three months, but is slower than the previous months.
  • Imports and exports were better than expected. Total imports and exports reached 30.51 trillion yuan, increasing by 9.9% over 2017, and is about one third of China’s GDP in 2018.
  • PPI also declined in Q4 and CPI did not change much. The consumer price index (CPI) increased by 2.1% for the year, which is lower than the official target 

Policy updates & hot topic analysis

Developing high-quality manufacturing, expanding the domestic market and all-round opening up and reforms in various fields are the top priorities for China in 2019

The annual Central Economic Work Conference is the most important economic meeting of the year aside from the “Two Sessions". At this meeting, the top leaders regularly conclude the year and then map out the major economic issues of the next 12 months. The following are the key takeaways from the December 2018 meeting from a business perspective.

China will speed up infrastructure investment in 2019

As mentioned earlier, while infrastructure investment accounted for about 22% of total fixed asset investment in 2018, investment in this sector was weak and only increased 3.8% during the year. Compared to total fixed asset investment growth of 5.9% in 2018, there is room for infrastructure investment to pick up.  

Will sports be one of new bright spots for China’s economy in 2019?

Our earlier analysis shows a slowdown in China’s economy in 2019 is very likely to happen. Slower GDP growth will have big impact on many industries and sectors. While China’s economy is still in transition from being investment and export-oriented to consumption and perhaps also import-driven, some industries are expected to trend downwards and others upwards. So, what are the new bright spots for China’s economy in 2019?

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Thomas Leung

Mainland China and Hong Kong Managing Partner - Markets, PwC China

Tel: +[86] (10) 6533 2838 / +[852] 2289 8288

Elton Huang

Managing Partner, Central China Markets Leader, Shanghai Office Lead Partner, Entrepreneurial and Private Business Co-Leader, PwC China

Tel: +[86] (21) 2323 3029

Elton Yeung

Vice Chairman, Strategy and Innovation Leader, PwC China

Tel: +[86] (10) 6533 8008

G. Bin Zhao

Senior Economist, PwC China

Tel: +[86] (21) 2323 3681

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