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China’s GDP growth seen slowing to 6.2% in second quarter: AFP poll
BEIJING, July 12, 2019 (BSS/AFP) – China’s economy grew at its slowest
rate in nearly three decades in the second quarter, according to an AFP
survey of analysts, hit by the US-China trade war and weakening global
demand.
The world’s second largest economy expanded 6.2 percent in April-June, the
poll of 10 economists predicted ahead of the official release of gross
domestic product figures Monday.
The reading would mark the worst quarterly growth in almost three decades
but stay within the government’s target range of 6.0-6.5 percent for the
whole year. The economy grew 6.6 percent in 2018.
Beijing has stepped up support for the economy this year but the moves
have not been enough to offset a domestic slowdown and softening overseas
demand for its toys, gadgets and electronics.
Policymakers are likely to take further action, analysts say, with Premier
Li Keqiang presiding over a state council meeting Wednesday that pledged to
lower tariffs and step up tax rebates for exporters.
“The existing tariffs on exports to the US are having an impact on China’s
economy,” said Steven Cochrane, chief APAC economist with Moody’s Analytics.
“Industrial production and exports are also weak, with shipments to the US
declining significantly,” he said.
Beijing pushed forward a raft of stimulus measures earlier this year to
cushion the impact from its cooling economy, increasing spending on roads,
railways and other big-ticket infrastructure projects, and tax cuts worth 2
trillion yuan ($297 billion) kicking in from April.
The policies buoyed the economy in March and brought in 6.4 percent growth
for the first quarter, but it proved no more than a short-term panacea.
Industrial output surged 8.5 percent in March before tumbling in April and
dropping to five percent growth in May, the slowest increase since 2002.
The build in infrastructure investment has also retreated from the first
quarter, coming in at 4.0 percent in January-May, sharply down from years of
near 20 percent expansion.
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China’s 1.3 billion consumers have remained a bright spot.
“Consumption is holding up relatively well, possibly reflecting the
effects of income and value-added tax cuts,” said Tommy Wu of Oxford
Economics.
-‘Unstable equilibrium’-
Sales of big-ticket items such as cars have not held up, though, with
sales down 12.4 percent in the first half of the year, according to the China
Association of Automobile Manufacturers.
Analysts widely expect Beijing will step up with further easing in coming
months, with Cochrane tipping new measures heading into 2020.
“This will include lower real interest rates for small firms, further
reserve requirement ratio reductions, and ongoing infrastructure spending,”
he said.
The overall downward trend gives President Xi Jinping little room to fight
back forcefully against the US, which is using tariffs as leverage to try to
force China into opening up its economy.
Washington and Beijing have hit each other with punitive tariffs covering
more than $360 billion in two-way trade and damaging manufacturers on both
sides of the Pacific.
US President Donald Trump and Xi agreed to revive negotiations when they
met on the sidelines of the G20 summit in Japan on June 29.
Top US and Chinese negotiators held phone talks on Tuesday but it remains
unclear if the wide rupture that has formed since talks broke down in May can
be patched over.
On Thursday Trump raised eyebrows with a tweet accusing China of not
fulfilling a pledge to buy more agricultural goods, adding: “Hopefully they
will start soon!”
Bj”rn Giesbergen of RaboResearch said “we are currently in a stable,
unstable equilibrium” with the US-China trade war.
“Ultimately we believe it will be impossible to reach a long-lasting deal.
As such, the question is not if tensions will flare up again, but rather
when,” he said.
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