Monday, 16 December, 2019

China GDP growth slows to 6.2 per cent in second quarter

China's trading partners and financial markets are closely watching the health of the world's second-largest economy as the US-China trade war gets longer and costlier China GDP growth slows to 6.2 per cent in second quarter
Ginger Lawrence | 16 July, 2019, 15:39

The 6.3-percent GDP increase, achieved amid slower global economic growth, weak expansion of worldwide trade and domestic downward pressure, made China still one of the world's fastest-growing major economies, Mao said.

The data released on Monday showed China's economic growth rate slowed from 6.4% in the first three months of the year.

Beijing has leaned largely on fiscal stimulus to underpin growth this year, announcing massive tax cuts worth almost 2 trillion yuan ($291 billion) and a quota of 2.15 trillion yuan for special bond issuance by local governments aimed at boosting infrastructure construction.

US President Donald Trump on Monday portrayed America as being on the winning end of his trade war, saying tariffs are punishing China's economy while generating billions of dollars for the United States, an economic victory that will allow him to continue his fight without domestic harm.

"It is no surprise that China is slowing down and if you look at the other components of the data like retail sales and industrial production, they are looking a little bit better than expected", said CMC Markets analyst David Madden.

Pauline Loong: The numbers that we're seeing for the second quarter is only minimally attributed to the trade war.

President Trump praised China's slow growth while crediting his own tariff policies.

Despite the slowdown, the growth of the world's second largest economy still falls within Beijing's GDP target for this year, set between 6 and 6.5 percent.

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"China's e-commerce sector has posted remarkable achievements as it drives global development", said Jennifer Ye, PwC China consumer markets leader.

Value-added industrial output, which measures production at factories, mines and utilities, rose 6.3% (link in Chinese) year-on-year in June, up from 5% growth in the previous month. This was a slower growth than the 6.4% that traders were expecting.

"Uncertainty caused by the US-China trade war was an important factor and we think this will persist", said Tom Rafferty, principal economist, China at The Economist Intelligence Unit.

"Economic conditions are still severe both at home and overseas, global economic growth is slowing down and the external instabilities and uncertainties are increasing", said NBS spokesman Mao Shengyong.

Analysts said the 6.2% annual rate of growth reported for April-June suggests the trade war between the USA and China is hammering industries.

A disappointing number would add to worries about slowing global growth and reinforce the case for more stimulus by Chinese authorities as a damaging trade war with the United States rages on. In what analysts see as a momentary truce, Trump chose to hold off on a threat to impose new tariffs on about $300 billion worth of additional Chinese imports. Fixed-asset investment also picked up, rising 5.8 per cent on-year in January-June, from 5.6 per cent in January-May. "Those efforts will help the Chinese economy bottom out in the fourth quarter", he said. But the concerns remain as China's imports declined by 7.3 per cent in June. The US Federal Reserve has also signaled it may lower interest rates.

Exports to the USA fell at a more moderate pace of 4.2 percent after dropping 13.2 percent in April, while China's imports of USA goods declined 26.8 percent from a year earlier.