China’s economy expanded at its slowest rate in nearly three decades in the third quarter, hit by cooling domestic demand and a protracted US trade war, data showed Friday, with an official warning of “mounting downward pressure”.
Gross domestic product expanded 6.0 percent in July-September, down from 6.2 percent in the second quarter, according to the National Bureau of Statistics (NBS). The reading — in line with an AFP survey of 13 analysts — is the worst quarterly figure since 1992 but within the government’s target range of 6.0-6.5 percent for the whole year. The economy grew 6.6 percent in 2018.
The deal, however, did not roll back any of the stinging tariffs already imposed on hundreds of billions of dollars in trade between the economic powers.
“The national economy maintained overall stability in the first three quarters,” said NBS spokesman Mao Shengyong. “However, we must be aware that given the complicated and severe economic conditions both at home and abroad, the slowing global economic growth, and increasing external instabilities and uncertainties, the economy is under mounting downward pressure.”
Services and high-tech manufacturing were the key areas of growth, while employment was “generally stable”, he added.
Propping up economy
Beijing has stepped up support for the economy with major tax and rate cuts and has scrapped foreign investment restrictions in its stock market. On Wednesday the central bank said it was pumping 200 billion yuan ($28 billion) into the financial system through its medium-term lending facility to banks, which is designed to maintain liquidity.
But the efforts have not been enough to offset the blow from softening demand at home. The trade conflict and weak domestic demand prompted the International Monetary Fund to lower its 2019 growth forecast for China to 6.1 percent from 6.2 percent on Tuesday.
The long-running trade war with the US has also chipped away at the Chinese economy. This week, Beijing posted weaker-than-expected import and export figures for September after Washington imposed new tariffs that month.
The slowing global economic growth, and increasing external instabilities and uncertainties, the economy is under mounting downward pressure.
And there were mixed signals for the economy in September. Industrial output rose 5.8 percent, from 4.4 percent in August, led by a surge in demand for solar panels and electric vehicles, according to the NBS.
— jeroen blokland (@jsblokland) October 18, 2019
But fixed-asset investment slid to 5.4 percent on-year in January-September, from 5.5 percent in January-August, as the government warned against risky borrowing to build roads and bridges that could artificially pump up GDP in the short run.
China’s army of consumers were slowly starting to open their wallets again, with retail sales edging up 7.8 percent on-year in September, compared with 7.5 percent in August. “Despite a stronger September, pressure on economic activity should intensify in the coming months,” said Julian Evans-Pritchard of Capital Economics in a note.
He said he expects infrastructure spending to decline as China tries to rein in toxic debt and added that the recent boom in property development “looks set to unwind”. “We expect monetary policy to be loosened before long in response, but it will take time for this to put a floor beneath economic growth,” he added.
Let’s make a deal
A “phase one” deal announced by US President Donald Trump last Friday after he met China’s top negotiator Liu He in Washington offered a temporary reprieve from further tariff hikes.
NBS spokesman Mao said the mini-deal was “good sign” for global markets. “We feel that the global economy and global trade are increasingly moving towards reducing protectionism and… freedom,” he said.
China’s army of consumers were slowly starting to open their wallets again, with retail sales edging up 7.8 percent on-year in September, compared with 7.5 percent in August.
The deal, however, did not roll back any of the stinging tariffs already imposed on hundreds of billions of dollars in trade between the economic powers, nor did it address another round of import taxes planned for December.
“A limited agreement will not resolve the underlying areas of disagreement between the two sides as long-term divergence in US and China national interest remains across trade, technology, investment and geopolitics,” said Michael Taylor, a managing director for Moody’s Investors Service.
China’s commerce ministry spokesman Gao Feng said Thursday that its negotiators have “accelerated efforts” to hammer out the details of this mini-deal, and the two sides were aiming for an “early agreement”.
Trump had said Wednesday that he hopes to sign the deal with Chinese President Xi Jinping at the APEC summit in Chile next month — but Gao declined to offer details on whether the text would be ready before the mid-November deadline.
AFP with additional input by GVS News Desk.