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China’s economic growth slows in Q3: AFP poll
BEIJING, Oct 17, 2018 (BSS/AFP) – China’s growth downshifted in the third
quarter as investment slowed and the widening trade conflict with the United
States weighed on sentiment, according to analysts surveyed by AFP.
The world’s second largest economy expanded by 6.5 percent in the July to
September period, the poll of 12 economists found ahead of the official
release of gross domestic product figures on Friday.
The sluggish growth would mark China’s slowest pace of expansion since the
first quarter of 2009, when the financial crisis battered global markets and
knocked China’s export machine.
The trade row with the US comes at a tough time for China’s economy, which
has been hit by the government’s efforts to tackle a mountain of debt, with
credit for local governments and state-owned enterprises tightening and
infrastructure investment declining.
The third quarter forecast is down from 6.8 percent and 6.7 percent in the
first and second quarters, respectively.
Chinese policymakers have set a growth target of roughly 6.5 percent for
the year, down from 6.9 percent in 2017.
The slowdown could be from a combination of the trade war and
deleveraging, said Betty Wang, China economist at ANZ.
While China’s exports to the US have held up and expanded this year as
exporters rush goods across the Pacific to beat tariffs, the trade war has
undermined confidence in the economy, Wang said.
“The sentiment has definitely hit the market already,” Wang said.
The key Shanghai Composite Index has fallen 22 percent this year amid the
turbulence, while the yuan has fallen about nine percent against the dollar.
Beijing faces a delicate balancing act as it tries to increase lending to
private companies in need of credit, without further inflating the debt
balloon.
The People’s Bank of China has cut the amount of capital banks must hold
in reserve several times this year, while the central bank’s chief, Yi Gang,
indicated this week there are more levers to pull to keep the economic growth
rate up.
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– ‘May get worse’ –
Fixed-asset investment, especially in infrastructure, has fallen to record
lows this year as Beijing pushed deleveraging and local governments idled or
cancelled projects.
That has hit economic growth, analysts said, noting a rethink is underway.
“We believe the authorities have already given priority to boosting the
domestic economy over the stability of the RMB (yuan) policy and financial
deleveraging,” said Liu Ligang, Citibank’s chief economist for China.
Proactive policy responses could help stabilise growth at around 6.5
percent in the fourth quarter, Liu said.
“The trade war may get worse before it gets better, and the impact on
China’s economy could be more material in the coming quarters,” said Liu.
Relations between the world’s two largest economies have soured sharply
this year, as US President Donald Trump sought to inflict economic pain on
China to force concessions in trade negotiations.
Washington has hit roughly half of Chinese imports while Beijing has fired
at most US imports.
Exports still drive a significant chunk of China’s economy and
Washington’s tariffs targeting cars, machinery, electronics, consumer
appliances and others have led many firms to shift production and hold off on
further China investment.
Economists expect the trade frictions to more heavily weigh on growth next
year.
The International Monetary Fund said this week that the window of
opportunity for safeguarding global growth was “narrowing” as trade disputes
deepen and emerging markets face fiscal crisis.
The fund recently lowered its 2019 growth forecast for China, citing the
trade war, forecasting its slowest expansion since 1990.
The IMF also lowered estimates for the United States and the global
economy as a whole.
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