Peter Lewis: Asia business correspondent on China's economy slowing due to slump in investment

China's economy continues to slow down after months of decline, and retail sales and industrial production are at their lowest levels of the year. 

Falling property prices are also to blame, with house prices in Beijing down 19% from last year. 

Asia business correspondent Peter Lewis says that despite this downturn and the trade war with the US, China's exports have kept at a steady level. 

He said that Xi Jinping's focus on expanding markets independent of the US is helping keep the economy moving.

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Episode Transcript

Speaker 1 (00:00):
And as I say, Peter Lewis, our Asia business correspondent,

(00:02):
is with me right now, hy Peter, Good evening, Heather.
All right, So what's going on with the economy in China? Slowing?
Slowing quite a lot, in fact, because if you look
at the data that came out earlier this week, retail
sales and industrial production at the lowest levels now of
the year. And this has been going on for three
or four months, so it's not just a one off,

(00:24):
it's not just weather related factors. There clearly is a
gradual slow down. The thing that's helping the economy is
actually the first half of the year was pretty good.
The economy grew about five point three percent. So unless
we get a really sharp slow down now in the
remaining few months of the year, which threatens China's five

(00:46):
percent growth target, I don't think the authorities are going
to be too worried. They're not going to rush out
and do lots of stimulus. The reason why we're seeing
this slow down is it comes down to that old
theme again. Property property carries on falling. The price of
new homes and existing homes just seems to keep on

(01:06):
declining month after month. If you look at the data
in Beijing property prices. New home prices now down nineteen
percent from just one year ago, and that has a
big drag on overall consumer household economic sentiments because property
is the biggest part of a Chinese household's assets. Sometimes

(01:30):
they have two or three properties in fact, which are
owned by sort of several generations of the same sort
of family. But this is really holding back the economic
growth in the mainland. What is doing well, surprisingly maybe
given that there's a trade war going on with the US,
is exports are holding up very well. Now they've collapsed

(01:52):
to the US, they're down by about a third now
over the past few months, but they're really growing in
other parts of the world, particularly the emerging markets of
Southeast Asia, Middle East, Latin America. And this is deliberate
part of Jijiping's policy to go and really move away
from being dependent upon the US and finding new sources

(02:15):
of business, new sources of growth and where they can
sell Chinese goods to And that's working very well. So
that is holding up the economy. If it hadn't been
for exports, the economy will be far worse. Yeah, And
speaking of the relationship with the US, where are we
at with TikTok. Well, Scott Bessens, who was in Madrid

(02:36):
at the beginning of the week meeting his Chinese counterpart
Hurley Feng, who is the Chinese Vice Premier and responsible
for negotiating these trade deals, announced that a deal had
been reached with TikTok. Now, you remember the bill that
Joe Biden signed into law a year or so ago
called for either TikTok to be sold by byte Dance,

(02:58):
the Chinese company that owned it, to an American controlled company,
or it had to shut down in the US. So
discussions over this have been going on for a long time,
and it appears that now TikTok will be put into
a US company that's eighty percent owned by US investors
like Oracle, and twenty percent by Chinese investors. So first

(03:21):
site all well and good, looks like you know, they've
done what they said they would do, divest the company.
How to byte Dance put it into a US company.
But here's the thing. The whole thing about TikTok is
its algorithm. The algorithm is the secret source behind how
TikTok works, which directs people to certain videos, and the

(03:44):
US sees the algorithm as a national security risk because
it could be used for propaganda purposes, could be used
to mislead young people in the country, influence elections, and
so on. So the law had always insisted that the
algorithm is what needs to be put into the US company.
Now this is where it looks like it could well

(04:05):
be another taco trade. In other words, Trump always chickens out.
What it looks like according to the Chinese is that
they will remain keep control over the algorithm. It will
stay in Beijing, it will be owned by byte Dance,
and they will license it to this American company. Now
that is very different. A licensing agreement is very different

(04:27):
from it being divested and sold to the American company,
because it means the Chinese company Byte Dance, will still
retain control over the algorithm. So it looks like, once again,
this could be another win for China, and how it's
being portrayed by Scott Bessant is not quite what was

(04:47):
initially envisaged when the law was signed into effects by
Joe Biden. We'll learn more today because Eujinping and Donald
Trump are going to speak about it on the phone
and see if they can agree the terms of this fascinating.
We'll keep an eye out for that. Peter, as always,
thank you very much and have yourself a lovely weekend.
That's Peter Lewis, our Asia Business correspondent. For more from
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