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CHINA-ECONOMY-GROWTH-UPDATE
China economic growth slows in second quarter, warns on trade war
BEIJING, July 16, 2018 (BSS/AFP) – China said on Monday its economic growth
slowed slightly in the second quarter as a trade war with the United States
gained pace, while it warned of the global damage that could be caused if the
row persists.
The world’s second-biggest economy expanded 6.7 percent in April-June, down
from 6.8 percent in the first quarter and in line with a forecasts in an AFP
survey of economists.
The data was released just as European Council President Donald Tusk said
at an EU summit with China in Beijing that trade tensions could spiral into a
“hot conflict”, calling on the US, China and Russia to find a resolution.
Despite the quarterly deceleration, growth was still higher than the annual
target of around 6.5 percent set by the government, but China nevertheless
faces an “extremely complex environment both at home and abroad”, said Mao
Shengyong, a spokesman for the national statistics bureau.
Beijing faces a multi-front battle to defend its economy, fighting to cut
its debt mountain while the yuan currency and Chinese stock markets tumble.
“World trade protectionism continues to heat up, posing a major challenge
to the world economic recovery and adding challenges and uncertainties for
us,” Mao said.
“From our domestic perspective, economic development has still been
unbalanced and unstable, and is still in the process of structural adjustment
and transformation.”
The impact of the deepening trade conflict with the United States was yet
to fully kick in, Mao said, noting that Beijing would continue to assess the
situation in the second half of the year.
– Slowing down –
But he added that the fight “will have an impact on the economies of both
China and the United States, and now that the world economy is deeply
integrated, and the industrial chain is globalised, many related countries
will also be affected”, Mao said.
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CHINA-ECONOMY-GROWTH-UPDATE 2 BEJING
The dispute with Beijing comes on top of Washington’s confrontations with
other major trading partners including Canada, Mexico and the European Union,
which have also retaliated against the US.
Washington and Beijing imposed tit-for-tat tariffs on $34 billion of goods
this month and the US raised the stakes last week by threatening to impose
measures on another $200 billion worth of goods, prompting China to vow
retaliation.
Over the past decade, about 20 percent of China’s exports have gone to US
markets, according to Moody’s Investors Services, with exports still
accounting for a sizeable chunk of the giant economy.
Trump’s latest threat would mean Washington will have imposed tariffs on
around half of China’s total exports to the United States.
“China’s economy appears to be on a slowing path. The government seems to
be easing policy gently… despite its goal of minimising financial risks,”
said Alaistair Chan of Moody’s.
“Trade disputes with the US have hurt market sentiment, and investment is
also cooling.”
Beijing’s battle against debt has curtailed spending — with growth in
fixed asset investment slumping to 6.0 percent in the first half of the year,
the slowest pace on record.
Manufacturing activity also slowed in June, as did output at factories and
workshops.
Although trade data last week showed China’s export machine holding up,
analysts warned the numbers may have been inflated by exporters pushing out
shipments early to beat the scheduled tariffs.
Retail sales, a key gauge of Beijing’s campaign to rebalance its economy
toward domestic consumption, provided a bright spot, growing 9.0 percent in
June.
The yuan’s slide is hurting Chinese consumers while helping exporters who
face the higher US tariffs.
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CHINA-ECONOMY-GROWTH-UPDATE 3 LAST BEJING
– Stimulus measures –
“The upshot is that the statistics bureau is now starting to more publicly
acknowledge that the economy is losing steam,” said Julian Evans-Pritchard,
China economist at Capital Economics, wrote in a research note.
“This should make it easier for officials to justify shifting to a more
supportive policy stance.”
The statistics bureau said economic progress must be balanced with
“maintaining stability”, indicating supportive policy measures could be
rolled out as needed.
Noting the fall in infrastructure investment, Mao said “compliant projects
may come to fruition at a faster pace” in the second half of the year.
China’s central bank has taken steps to free up funding for small firms,
and some analysts forecast an interest rate cut to stimulate the economy.
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